Large asset owners double down on private markets as they navigate heightened economic and geopolitical risks, according to Mercer 

NEW YORK, April 28, 2025 — Mercer, a business of Marsh McLennan (NYSE: MMC) and a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people, today released its 2025 Large Asset Owner Barometer. The asset owners surveyed, representing over $2 trillion in assets collectively, offer valuable insights into the investment decision-making of the largest pools of capital. While large asset owners share common views on global risks, regional differences in allocation strategies are apparent. 

Eimear Walsh, Mercer’s European Head of Investments, said, “Equity, fixed income and currency markets are experiencing extreme volatility due to trade tensions, but, from our data, we can see that large asset owners are positioned for the long term and appear broadly sanguine about shorter-term market moves. That said, in the year ahead, they plan to make some strategic portfolio adjustments, just as they did last year, to mitigate the risks and exploit the opportunities they see emerging.”

Large asset owners (LAOs) remain confident that their portfolios are well-positioned to withstand a range of shocks over the coming year. However, LAOs consider themselves more vulnerable than a year ago to several key risks during the next 12 months, including geopolitical risks (35% v. 31% in 2024), inflation (31% v. 22%), and monetary tightening (30% v. 23%). Over a three-to-five-year period, the perception of vulnerability to most risks increased slightly. Notably, regulatory risks over this period were cited by 32% of LAOs, up significantly from 20% in last year’s survey. This suggests that asset owners are unsure about the future direction of regulation after a year of significant political change and the impact this may have on portfolios. 

Over the past year, LAOs have taken various measures to protect their portfolios from risks, including adjusting the duration of fixed-income allocations (53%) and adjusting the geographic exposure of assets (47%). Nearly half (45%) of respondents increased their allocation to private markets, a trend set to continue in 2025. 

Looking ahead over the next 12 months, nearly half (47%) of LAOs anticipate growing their portfolio allocation to private debt/credit, while 46% expect to increase their infrastructure allocations. This is particularly pronounced among the largest asset owners; 70% of those with more than $20 billion under management intend to increase allocations to private debt/credit in the next 12 months, and 63% intend to invest more heavily in infrastructure.

“Only five percent – one in 20 – of the asset owners surveyed manage their investments entirely in-house,” said Rich Nuzum, Mercer’s Executive Director of Investments and Global Chief Investment Strategist. He added, “In an increasingly complex investment environment, we see a significant appetite among large asset owners for outsourcing investment management, with the most complex asset classes often being handled by outside teams.”

While broadly confident about their resilience, European LAOs exhibit a higher degree of concern about risks than their peers in the US; 43% of European LAOs believe their portfolios are vulnerable to geopolitical threats in the next three to five years, compared with just 18% in the US. 

Unlike LAOs in the US and UK, European asset owners appear more positive about investing in the equities of their domestic market. Thirty-four percent of European-based LAOs expect to increase allocations to European equities over the next 12 months. On average, LAOs in the US and UK are more likely to decrease allocations to their domestic equity markets. 

There is also some evidence that European LAOs, which may have been under-allocated to private markets compared to their US peers, are now seeking to close this gap. Almost half (48%) of European LAOs allocated investments to private markets in the last 12 months, compared with 27% of those based in the US. 

More than two-fifths (43%) of LAOs surveyed believe that AI will be a highly influential factor in shaping the macro environment over the next five to 10 years, ahead of geopolitics (34%) and the energy transition/climate change (34%). Despite this sentiment, more than two-thirds (69%) of LAOs say they have neither implemented nor started developing an AI/GenAI policy. 

The largest asset owners (with AUM exceeding $20 billion) are more likely to incorporate sustainability goals into their investment objectives, with 81% including these goals in their policies, compared to 64% among smaller asset owners. Furthermore, over the next 12 months, nearly a quarter (24%) of LAOs intend to increase their allocation to ESG/sustainable funds, and 29% expect to increase their exposure to impact strategies.

Despite this, the number of LAOs intending to set climate transition and net-zero targets is declining. Over one-third (39%) are not planning to set net-zero targets (v. 29% last year), and nearly four in 10 (39%) are not planning to set climate transition targets (v. 8% last year). 

Research for the 2025 Large Asset Owner Barometer was conducted through an online survey from October 1, 2024 to January 15, 2025, and 74 organizations from more than 16 countries responded. Large Asset Owner respondents are defined as having approximately $2 billion or more under management, including pension funds, insurers, not-for-profits, wealth managers and sovereign wealth funds. 

Mercer, a business of Marsh McLennan (NYSE: MMC), is a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of over $24 billion and more than 90,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit mercer.com, or follow on LinkedIn and X.

 

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