Institutional investors we interviewed unanimously agree that the current environment is radically different from the global investment conditions of the previous three decades. In that environment, the median institutional investor produced 9.5 percent in annual returns from 2012 to 2021 (exhibit).
Consider how the breakup of the Soviet Union ushered in three decades of peace, rising prosperity, and global economic integration that institutional investors have grown accustomed to. Past turning points have released forces that fundamentally shaped the subsequent era. As they aim to evolve their strategies in a far more unpredictable world, leading institutions are seeking to hone their “performance edge” by focusing on purpose, portfolio construction, and proficiency. Our research uncovered insights into how institutional investors are navigating these external upheavals. To understand how institutional investors are responding to the new circumstances, we collected perspectives from senior executives at 40 of the world’s leading pension and sovereign-wealth funds, which collectively manage $10 trillion in assets. This article is a collaborative effort by Ismail Bel-Bachir, Sacha Ghai, Duncan Kauffman, Eser Keskiner, Robin Matthias, Elizabeth Skovira, and Marcos Tarnowski, representing views from McKinsey’s Private Equity & Principal Investors Practice.
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