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Published in partnership with IFM Investors

Asset owners hunting for new private market opportunities amid rising geopolitical volatility increasingly include Europe as a priority destination.

The shift in sentiment is clear: Half of global institutional investors now identify the region as a key target for infrastructure debt, and 44 percent for infrastructure equity.

“Infrastructure is increasingly seen as a way to generate alpha and boost portfolio performance,” said Mercer’s global head of real assets, Alan Synnott.

“In Europe, clients are typically drawn to infrastructure for its consistent returns and stabilising effect on portfolios. In Asia, approaches vary widely, reflecting the different levels of market development and sophistication across countries.”

Source: IFM Investors Private Markets 700 Global Investor Barometer 2025

The sustainability edge

One factor driving the appeal is Europe’s sustainable edge, with investors in North America, APAC, Europe and the Middle East listing sustainability as a financial driver for value creation and a top priority in their private market decisions.

North America is a long-term leader in energy infrastructure and data centres. But Europe also offers a well-established market with private sector participation across a range of sectors, giving investors broader exposure to themes, said Andrea Mody, head of North America, clients and strategy at IFM.

“Private infrastructure in North America is still evolving as an asset class compared to Europe, where the market is more mature, with its strong regulatory systems, history of public sector and private sector cooperation, and long track record of private sector capital in infrastructure,” Mody tells Top1000funds.com.

“Investors see Europe as an attractive destination, particularly those focused on sustainability and clean energy. When it comes to energy, North America is still viewed as an enormous market but it’s more an ‘everything, everywhere, all at once strategy’ rather than just about renewables.”

Europe’s leading position in renewable energy infrastructure represents a meaningful shift from just a couple of years ago when, according to Mody, North America was probably the leading place to invest.

“Some of the geopolitical changes, and question marks around energy security and defence, have caused hope for higher growth in Europe and investors are seeing Europe as an attractive and relatively safe destination where many investors believe they’ll have more policy certainty in the near term,” she said.

Growth, digitisation and decarbonisation

Asia Pacific (ex-Australia and New Zealand) ranks as the fourth most attractive region for private market investors, according to the IFM report, with 41 per cent looking at the region for infrastructure debt and 38 per cent for infrastructure equity.

When it comes to digitisation, IFM sees a lot of opportunities across the region, but especially in developing Asia where digital penetration rates are still very low compared to more developed markets.

Australia’s largest superannuation fund, AustralianSuper, has also identified digitisation and sustainability as strong themes and attractive drivers for the asset class. The A$387 billion fund has increased its allocation to digital infrastructure, particularly data centres in North America, over the last several years, according to Roger Knott, acting head of real assets.

Market appeal

The IFM Investors’ second annual Private Markets 700 report also found that different investors like private infrastructure for different reasons.

Investors agree that infrastructure can add diversification, stable income, and long-term growth to a portfolio, but certain characteristics stand out depending on regional priorities.

“As infrastructure strategies become more sophisticated, investors across regions appear to be aligning their capital with distinct priorities, whether focused on performance, stability or sustainability,” the report states.

Armit Bhambra

Among European investors, there are three key nuances, said Armit Bhambra, head of client solutions EMEA at IFM. They are a sharp focus on risk management, regulatory stability and sustainability.

“There is a significant focus on risk management, specifically diversification and inflation-hedging to build portfolio resilience,” Bhambra said.

“Investors in the region are concerned about inflation, with one cause being the evolving tariffs position in the US. Many are looking to private markets to help them insulate their portfolios from this risk. Asset classes like infrastructure, where revenues can be quite directly linked to changes in inflation, are increasingly seen as helpful portfolio construction building blocks.”

Regulatory stability

Bhambra said investors in Europe are also looking for regulatory stability because it enables them to make long-term high conviction investments.

“ ‘Our survey indicates that investors view Europe’s regulatory environment as an important factor when making allocations to private markets in the region, due in part to their long-term nature of those investments,” he said.

“Sustainability is really important to European and EMEA investors too, underpinned by a belief that the energy transition is unstoppable, irrespective of momentary political changes and momentary thematic changes.”

At AustralianSuper, sustainability is deeply embedded into the group’s governance and stewardship practices.

“ESG (Sustainable Investing) is something that we’re very attuned to,” Knott said in the IFM Report.

“Environmental impacts, governance and other social issues are front of mind across our investments. In infrastructure we pay strong attention to supply chain and labour condition standards.”

According to the research, infrastructure’s defensive, sustainable characteristics have special appeal to EMEA and Asia Pacific investors, while in North America, investors appear to be drawn to the asset class’s growth potential, especially in private infrastructure.

In North America, 48 per cent of infrastructure equity investors cite higher returns as their primary motivation, based on IFM’s research.

The IFM report found that North American investors expect net returns in the vicinity of 13.5 per cent from infrastructure equity and 9.7 per cent for infrastructure debt. This compares to 11.8 per cent and 7.7 per cent year‑on‑year in 2024, respectively.

Awash with opportunity

McKinsey estimates that US$106 trillion in global investment will be necessary through 2040 to meet demand for new and updated infrastructure.

While deal activity has remained robust in recent years, current levels of private infrastructure investment continue to fall materially short of what is needed, underlining the scale of the challenge and opportunity ahead.

There is no shortage of investment opportunities, Mody said.

“There is positive deal flow right around the globe,” she said.

“Australia is a smaller, more mature market but that doesn’t mean there aren’t opportunities there, and Europe is interesting, particularly around energy security and defence.”

When it comes to building infrastructure assets, different regions are moving at different paces, but every country and region recognises that they need to go on this journey, said Bhambra.

“China, Europe, North America and the Middle East are all running their own race, and some [regions] are long energy or long technology and it’s really interesting to observe,” he said.

“It is important to focus on quality and choose high-quality assets because in every category there is a spectrum. An experienced manager knows how to spot the difference.”

Australia’s third-largest pension fund, Aware Super, is considering a return to infrastructure funds after years of favouring direct investments. The infrastructure allocation currently stands at $15 billion and the fund sees benefits to access a “broader set of offerings” and opportunity sets via fund commitments to GPs, its head of infrastructure Mark Hector says.

The A$200 billion ($141 billion) Aware Super is considering a return to infrastructure funds after years of favouring direct investments in a bid to access more diversified assets via good-quality GPs, and juice up performance.

Head of infrastructure Mark Hector, who oversees the A$22 billion ($15 billion) infrastructure portfolio of which pooled funds represent 20 per cent, sees benefits to some investments via funds to access a “broader set of offerings” and opportunity sets via GPs.

While Aware Super’s infrastructure return has been “pretty good”, Hector says it has a way to go in becoming one of the consistently top-performing funds among the peer group.

“So questions have naturally been asked about, well, how can we go from being kind of good to great?” he tells Top1000funds.com in an interview from Aware’s Sydney office.

The answer may lie in an expansion of GP relationships as Hector believes there are a lot of managers who haven’t shown Aware Super its offering at all. “You don’t know exactly what those deals were like that you’re missing out on because you don’t necessarily get all that data,” he says.

“With some of the managers, their first port of call is always the LPs that go into their pooled funds who sign up contractually and get certain co-invest rights, and if they don’t take them up, or the deals are too big, then the GPs can go outside of their LP base to other investors.”

Aware has been mulling over a pivot to funds in the past year and will soon present the proposal in front of its investment committee.

“We haven’t really contributed any incremental capital to pooled funds for several years and a lot of that’s been focused around fees, but we’re doing some work at the moment where I think there’s a reasonable case that the fee strings might be loosened a little bit,” he says. Australian pension funds are highly conscious of costs due to pressure from Your Future Your Super, a regulatory performance test.

Aware has 16 professionals in its internal infrastructure investment team spread across the Sydney and London offices.

The strategic shift comes after Aware Super’s outgoing deputy chief investment officer and head of international, Damien Webb, foreshadowed at the Top1000funds.com Fiduciary Investors Symposium last November that the fund’s needs as an LP are changing as the fund grows.

Aware also wants to formalise some “ad hoc” relationships it has with current GPs. Macquarie Asset Management is a good example – even though Aware is not in any of the MAM pooled funds, Aware’s reputation of being a sophisticated investor means it’s a “natural port to call” when MAM is looking for partners in complex deals, Hector says.

The two completed a A$5.2 billion ($3.6 billion) acquisition of TPG Telecom’s fibre assets last July alongside its portfolio company Vocus.

“There’s nothing formal in place [in terms of contact with MAM]. We all each know that we exist, and we talk all the time about potential opportunities,” he says.

“But we do think there’s a world where we could formalise certain relationships, focus areas a little bit more, including a broader relationship where we can potentially put some money in pooled funds, and in return, we see a broader set of offerings.

“The hope, or the expectation, is that can help to produce an opportunity set that produces some returns that are even better than what we’ve been getting.”

Data lores

To generate alpha within private markets, the fund has formed an ‘AI working group’ that sits across its real assets and private equity team to bolster the collection and usage of unlisted asset data. Hector says artificial intelligence can do much more in helping better determine and price risks.

The project is among the first changes ushered in by Aware Super’s newly minted CIO, Simon Warner, who wants to cement the fund as a data and AI leader among super funds.

“One of our nirvana thoughts is in private markets… there’s a lot of information out there that is highly confidential and non-transparent, [but] you’ll find that increasingly over time more data will hit the public domain,” Hector says.

“For example, if you’re looking at a data centre investment and right now you don’t have access, wouldn’t it be fantastic if right next to you, you could look at 100 other data centre investments and make direct comparisons on a whole bunch of different investment parameters?”

The fund is in the midst of hiring external experts to nut out the scope of the project but Hector says the various private markets teams have some crossovers on their AI wish lists. For one, the teams all tend to get inundated with market and asset information from GPs, but AI could help extract – as an example – the reasons for over or underperformance in certain assets or sectors by summarising these external data files.

Data availability from fund managers hasn’t been a problem for Aware due to the limited allocation it has in pooled funds, but Hector says “some managers are better than others at being more open and transparent” with the level of information they provide.

Above all else Aware is most concerned with the accuracy of valuation, Hector says. Australian super funds face stringent requirements from the prudential regulator, APRA, to perform independent and regular valuations of unlisted assets and ensure accurate representation of performance.

“Across Europe and North America, generally speaking, there’s a lot of valuations that will be called independent, but they’re not. They’re done by independent internal valuation teams within GPs,” Hector says.

“They might get an external accounting firm to opine on that valuation, but that’s different to a to… a third-party firm doing their own genuine bottom-up assessment evaluation.

“Our problem is that it seems to be mostly just the Australian pension fund base that are really pushing the GPs for this [independent valuation]. They’re not getting those messages as much from pension fund systems in the Northern Hemisphere.”

The $100 billion Oregon State Treasury has been one of the longest-standing investors in private equity, a pioneering move that served it well.

In 2025 the allocation to private equity pushed beyond the outer policy allocation limit – 28 per cent of the fund – prompting the fund to take a close look at the asset class.

In this conversation Top1000funds.com editor Amanda White speaks to Oregon State Treasurer, Elizabeth Steiner, about the future role and expectations of private equity, how a maturing of the asset class puts pressure on returns, and the private/ public asset mix in the fund’s four-yearly asset allocation review which has just begun.

Asset owners have traditionally counted on external asset managers to pursue bold innovations, such as AI applications in investment, rather than stretching their limited internal resources to do so. But leading Stanford academic Ashby Monk has warned that this long-standing model is distilling short-term thinking in pension management and calls for asset owners to lean into their natural advantages and innovate.

Resource and governance constraints have pushed asset owners to offload bold innovations to external asset managers, who are commercially incentivised to pursue them, rather than building up internal capabilities themselves. But leading Stanford academic Ashby Monk has warned that this long-standing model is distilling short-term thinking in pension management, and is a missed opportunity for asset owners which focus on the long term.

Monk, who is executive and research director at the Stanford Research Initiative on Long-Term Investing, says the fundamental problem with asset owners outsourcing innovations to intermediaries is that their time horizons, and objectives, are misaligned. It’s an idea he explores in his latest paper, The Asset Owner Gearbox: Why Investment Innovation Grinds and How to Make It Turn.

“If you’re outsourcing all your innovation to asset managers, you’re going to get shorter-horizon innovation. A classic one is high frequency trading, because that is a timescale by which the asset manager can monetise that innovation in their business,” Monk tells Top1000funds.com.

“But a pension fund, they can monetise those innovations for 50 years. They’ve got these long, distant liabilities, and in fact, they need to manage these 50-year liabilities if they’re going to do their job.

“So increasingly – and I’m not alone in thinking this – we’ve come to believe the asset owner community needs to do some of the innovation.”

Monk defines innovations as inventions or discoveries. “Somebody inventing something is a very powerful form of innovation, but you can discover something that somebody else is doing and seek to apply it in your organisation – that’s still innovation,” he says.

Long-term innovations should ultimately help asset owners conduct better risk management, ensure portfolio resilience and improve returns. One prominent example is the total portfolio approach which more allocators are seeking to implement

But bringing about such change in asset owner organisations is difficult and Monk’s paper highlights a slew of roadblocks which might stifle risk-taking, such as cost visibility. Political and public pressure on US public pension funds to keep the cost low, for example, leads to under-resourcing in research and development.

“The irony is that external costs (those paid to managers, consultants, and service providers) are often much larger, yet less visible and less politically salient than internal headcount. Internal capability-building is experienced as ‘overhead,’ while external fees are frequently treated as ‘market cost’,” reads the paper.

“This visibility bias produces a predictable operating model: the organisation remains lean internally, while relying heavily on intermediaries for discovery, implementation, and even diagnosis.”

Another obstacle is the so-called “career-risk asymmetries”. The paper points out that in most asset owners, penalties for failed experiments are “immediate and personal” while the rewards are delayed and attributed to institutions rather than individuals. In turn, decision-makers in funds are less inclined to be “first movers” and only want to adopt strategies after they become common “best practices”.

This dynamic means initiating change becomes somewhat of a “heroic” act, Monk says.

“We hold up David Swensen as the hero of the Yale Model, swooping in and figuring out how to build the pacing models, the talent program, the compensation, and by the way, using the golf course on the Yale campus to recruit all the managers. Those were all the innovations that came together to be the Yale Model, but it required this central character as a hero,” he says.

“We want that ‘heroic innovator’ to become a thing of the past.”

principles for innovation

Monk proposes that innovation should not be driven by personalities or crises but by an “operating capability”. The paper suggests the following principles for asset owners when initiating innovations:

Favour small, reversible bets over significant commitments;
Use explicit kill criteria agreed before the start of the experiment;
Specify pathways through which successful pilot programs can be absorbed into official processes;
Resist ‘innovation theatre’ – the practice of adopting new policies and tools just to appear modernised to fund stakeholders.

Monk says technologies help investors either via speed or inference, and the latter is where real opportunities lie for long-term investors.

“For most of our careers, technology has been about speed – getting trades done faster, getting analysis done faster – but inference is really the power that comes with AI. These are new insights we didn’t even think of,” he says. “Inference is something that is really powerful over longer horizons. You can draw inference over what the world looks like in 10 years.”

“I actually think there is a world where these long-horizon investors become the best investors in the world, because they have the time horizon to allow these inferential insights to get priced in markets. So building their own tech that can adopt these longer horizon viewpoints that no private sector manager would do, because they might not even be in business 15 years from now, is another opportunity.”

The Healthcare of Ontario Pension Plan, HOOPP, the C$123 billion pension fund for Ontario’s hospital and community-based healthcare sector, is the latest long-term investor to flag mounting risks in private credit.

High profile corporate failures last year make strong covenants a vital ingredient to investment outcomes in one of the fastest growing areas of finance, yet Jennifer Shum, senior managing director, structured and private credit, tells Top1000funds.com that covenants have got notably lighter.

The boom in private credit has been accompanied by a spike in lighter covenants, reducing protection and guardrails for lenders including their ability to bring corporate boards to the table when things don’t go according to plan, she warns.

Meanwhile the cost of compound losses and already thin returns in the asset class would leave investors hard hit by any corporate collapse, she says.

“It’s hard to get out of a loss in this environment because returns are really skinny. How many good deals are you going to have to do to make up for that one loss?”

HOOPP has a 5 per cent target allocation to private credit that was only formalised from an opportunistic allocation to a core part of the return-seeking portfolio in 2023. The allocation encompasses real estate debt, direct lending and asset-backed finance in a strategy focused on diversification, downside protection, income generation and limited drawdowns.

Shum also attributes the rise in worrying Liability Management Exercises in private credit to weaker covenants: light covenants, she explains, allow stressed corporate borrowers to restructure or refinance without filing for bankruptcy, often by negotiating directly with lenders.

HOOPP’s investments in the asset class spans fund investments, co-investments and secondaries and by using all three, all the time, the team can maintain the sweet spot between diversification, downside protection and yield.

Yet she notes issues with covenants have spiked in the secondaries market too. Challenges around underwriting deals with the level of control and downside protection HOOPP would have insisted on had it invested at the onset, make her wary of some vintages.

“We’ve become more selective. Recent vintages simply don’t hit the mark for us particularly 2024 vintages, which raise flags around covenants.”

Her team views GP counterparties as essential partners, particularly supporting diversification in the portfolio. “We lean on them, and they bring us amazing deals and amazing strategies to which we will tack on co-invest alongside structured on a no fee no carry basis.”

She also sees a silver lining in HOOPP’s small private credit team of eight.

“We have so much to do, and there are so many incoming calls, it really helps with underwriting discipline. We can’t waste any time and have to move on quickly,” she says.

A Total Portfolio Approach

Her team is also supporting the integration of private credit into HOOPP’s total portfolio approach (TPA) launched in January 2026. Under TPA, the role of credit supplying yield, but also downside protection and diversification, will be formalised into an all-weather platform alongside public/private equity, infrastructure and real estate.

“Credit is now a very strategic part of how we construct the whole portfolio and its role in total portfolio construction has shifted a little,” she says.

She adds that HOOPP is still in the early days of implementation. The strategy is central to pillar two of its 2030 strategic plan which is focused on improving the resiliency and adaptability of the portfolio to maximise returns within a stated risk appetite, measured by real returns and funded status.

TPA is the latest innovation at the fund, founded in 1960, long-famed for its unusual LDI strategy.

A new approach to holding the major oil companies to account will see the West Yorkshire Pension Fund, together with a cohort of other UK and European pension funds, demand BP and Shell explain their business plans in a world of declining demand for fossil fuels.

The UK’s £19 billion ($25 billion) West Yorkshire Pension Fund (WYPF), a local government pension fund for the region’s public sector employees, is trying a different approach to its engagement with oil majors BP and Shell at this spring’s AGMs.

Together with a cohort of other UK and European pension funds – including the Swiss federal pension fund CHF42.5 billion ($54 billion) PUBLICA and Scotland’s £10.3 billion ($14 billion) Lothian Pension Fund – West Yorkshire has co-authored a resolution with the prominent Amsterdam-based climate activist group Follow This.

The resolution changes tack from demanding detailed carbon emission reductions in line with Paris-aligned targets. Instead, it requests the companies explain their business plans in a world of declining demand for fossil fuels in a resolution focused on financial performance and shareholder value creation, , head of ESG at WYPF, tells Top1000funds.com.

A “simple and precise” question asks BP and Shell to reveal viable and future-proof business models that take into account the anticipated decline in oil and gas demand projected by the International Energy Agency. The resolution requests that the companies reveal their capital expenditure on greenfield and brownfield sites and forecasted sales of oil and gas over the next 10 years, for example.

In 2020, when oil demand fell, BP and Shell cut their dividends by 50 per cent and 66 per cent, respectively.

“This resolution is fundamentally important. It asks the companies to articulate a viable business model that will allow them to succeed long-term. Politics and ideology have nothing to do with it – it’s about stranded assets as the world pivots away from oil. We thought that the new energy companies would be the old energy companies, but they are not embracing the transition, and we want to know what their strategy is going forward,” says Hulme.

One particular area of concern is Shell’s LNG strategy.

A resolution last year succeeded in asking the company to explain its LNG business model in more depth, but in a “delaying tactic” the company still hasn’t published more details about a strategy based on supplying and trading natural gas driven by demand from Asian economies, he says.

“They appear to have given up on the original plan, but what is the new one? Have they run this idea into the ground, and are now working on something else?” he questions.

Under listing rules, if a shareholder resolution receives 20 per cent of a vote, companies must engage and report back.

West Yorkshire currently invests around £200 million in Shell and £100 million in BP. Hulme says the pension fund’s internal equities team have a long history of engagement with the two companies, and its portfolio managers have good access rooted in long-term relationships.

The pension fund was supportive of the early moves both companies made towards the transition, setting CO2 reduction targets and investing in clean energy. But changes of leadership at the top of both BP and Shell, and the pivot away from the transition, meant shareholders like West Yorkshire felt their influence at the companies fade.

“Shareholders like us, keen on the transition, have become the minority. New plans to move into renewables went by the wayside and we are frustrated by the direction of travel and want to engage,” he says.

The latest resolution from Follow This also marks the activist group re-applying pressure on oil groups following a pause in filing shareholder resolutions last year due to a lack of investor appetite. In another set back, in 2024 the organisation was sued by Exxon which sought to block a resolution demanding the oil group do more to cut its greenhouse gas emissions.

“Follow This had to back off. They are a small organisation,” says Hulme.

He is undeterred by anti-ESG trends in the US and recent efforts by the Trump administration to limit investors’ ability to work with proxy advisors like Glass Lewis.

“We are a UK organisation based in West Yorkshire with different priorities and concerns,” he concludes.