In recent years, with the development of the financial industry, the scale of private debt funds has continued to expand. As an important part of alternative investments, private debt funds have received more and more attention from institutional investors. According to a quarterly report on advisor activity from private credit intelligence company PCFI, investors are increasingly committing to private debt funds based on the advice of top investment consultants. The report pointed out that allocations to private debt accounted for 12% of all advisor-led commitments over the past 12 months, with 9 of the top 10 consulting firms having recommended at least one private debt mandate during that time. This shows that top consulting firms like hewitt investments play an important role in guiding institutional investors’ allocations to private debt funds.
Hewitt investments ranks among top consulting firms recommending private debt
According to the PCFI report released on Tuesday, measured by total client commitments, 9 of the top 10 consulting firms recorded at least one private debt mandate over the past 12 months, leading to private debt accounting for 12% of all advisor-led allocations during the same period. PCFI noted that over the same period, the top 5 ranked private debt advisors – Cambridge Associates, Meketa Investment Group, Versus Investments, NEPC and Callan – saw advised private debt commitments grow 44%.
The report pointed out that Cambridge Associates was the top consulting firm in terms of client private debt commitments. It advised nearly $2.9 billion of private debt investments over the past 12 months. But PCFI noted that Cambridge could be in the “pole position, with several peers including Meketa and NEPC accelerating private debt programs in 2021 to keep up with AUM growth among investors.”
According to the report, among the top 10 potential consulting firms, 9 recorded at least one client private debt opportunity in the first quarter of 2021. PCFI noted in the report: “NEPC captured the most with five opportunities, advising several clients to increase private debt targets at the expense of hedge funds.” “RVK, Aon Hewitt, Callan, Versus and Meketa all advised multiple investors to seek private debt.”
The number of commitments and searches in the first few months of this year may be affected by fiscal calendar fluctuations. Compared with the last quarter of 2020, the number of potential private debt searches in the first quarter of 2021 may be “temporarily” lower.
Hewitt investments expects rebound in private debt commitments
The PCFI report predicts that with investor plans already in place, private debt commitments will accelerate in the second quarter of 2021.
The report also outlined other asset categories in the private markets, including private equity, equity, fixed income, real estate, infrastructure and real assets, and hedge funds. On the private equity front, PCFI predicts commitment activity will increase as in-person meetings begin to resume. After a turbulent 2020, the research firm likewise expects new opportunities for public equity mandates.
Meanwhile, on the fixed income front, PCFI said the top three advisors in fixed income consulting capital – including Aon Hewitt, NEPC and Callan – saw consolidation.
As for real estate, the research firm said recent allocations were driven by “opportunities in the private rental sector and various investment strategies associated with increased support from Western governments for affordable housing.”
On the infrastructure and real assets front, PCFI said the top 10 advisors by client infrastructure commitments completed 54 mandates over the past 12 months.
The research firm expects manager evaluations to increase as the asset class continues to expand.
Meanwhile, hedge fund commitments remained highly concentrated among the top three hedge fund advisors. PCFI said it expects consultant-led flows to hedge funds to continue coming from “a small group of specialists.”
Overall, top consulting firms like hewitt investments are expected to continue playing an important role in guiding institutional investor allocations across private market asset classes like private debt. Their recommendations provide validation and can give investors confidence to commit to private market funds.
In summary, top consulting firms like hewitt investments are increasingly driving institutional investor allocations to private debt funds. 9 of the top 10 firms recommended private debt in 2021 Q1, leading to private debt accounting for 12% of total advised commitments. Hewitt investments and peers are accelerating private debt programs amid asset growth. Commitments are expected to increase through 2021 after plans were put in place.