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Institutional Investors Are Rethinking Diversification

3 June 2026

In an era defined by rapid financial shifts, institutional investors are navigating an increasingly complex landscape. A global energy crisis and geopolitical uncertainty resulting in inflation shocks and increased correlations have fundamentally reshaped market dynamics.

“The path forward lies in expanding beyond traditional investment frameworks. Markets are no longer behaving in predictable ways,” Jan Erik Saugestad, CEO of Storebrand Asset Management.

“We increasingly see that investors look beyond equities and bonds and incorporate alternative assets such as real estate, infrastructure, and private equity when building resilient portfolios.”

A Broader Investment Universe

The rationale for alternative investments is rooted in diversification, an idea famously articulated by Nobel laureate Harry Markowitz, who described it as “the only free lunch” in finance. In practice, this means combining assets with low correlation, to reduce overall portfolio risk while improving return potential.

“If we look at infrastructure investments, they typically show a correlation of roughly 0.3 with equities and 0.15 with investment-grade credit,” Saugestad explains. “That makes them highly effective as a stabilizing component in a portfolio.”

But diversification is only part of the story. Real assets also offer structural advantages in today’s macroeconomic environment. Many infrastructure and real estate investments generate steady, long-term cash flows tied to essential services, such as energy, water, transportation, and communications, often with built-in inflation protection. 

“These are assets that people rely on every day,” Saugestad says. “They provide predictable revenue streams and can help preserve purchasing power in periods of rising prices.”

From Abstraction to Tangibility

Despite their advantages, alternative investments have historically been perceived as opaque or complex. Saugestad believes this perception is beginning to shift, as investors increasingly recognize the tangible nature of these assets.

“There is something fundamentally reassuring about investing in things you can see and understand,” he says. “Our direct investments in real estate and infrastructure are not just financial instruments, they are physical assets that generate real income and deliver measurable societal value.”

Whether it is renewable energy installation producing electricity or a transportation network generating ticket revenues, these investments bridge the gap between financial performance and real-world impact.

In an industry often dominated by abstract models and market volatility, this tangibility offers both clarity and confidence.

The Ownership Advantage

Private equity occupies a distinct position within the alternatives landscape. Unlike listed equities, it offers investors not only access to companies off the public markets, but also the ability to exert meaningful influence over strategy, operations, and long-term value creation.

“We have been investing in private equity since 1999, one of the earliest Nordic institutions to build a systematic program in the US and European markets,” Saugestad says. “Nearly three decades of relationship-building have given us privileged access to top-tier managers and opportunities that are often unavailable to new entrants.”

Access and Alignment

A key differentiator for Storebrand Asset Management is its structure. Backed by the Storebrand Group’s life insurance companies as anchor investors, the firm is able to access large-scale opportunities that are typically beyond the reach of many institutions.

“Our clients benefit from co-investing alongside long-term capital with aligned interests,” Saugestad explains. “It gives them access to high-quality opportunities in mature markets with relatively low regulatory risk.”

The Challenge of Time

While the benefits of alternative investments are increasingly clear, they require a shift in mindset. Unlike liquid public market assets, many of these investments are designed for long-term horizons, often spanning 10 to 20 years.

“The biggest hurdle for many investors is psychological,” Saugestad notes. “Committing capital for decades requires a different way of thinking.”

To address this concern, Storebrand in some cases offers a liquidity mechanism that allows investors to exit under certain conditions, providing an added layer of flexibility in an otherwise illiquid asset class.

“It gives investors greater confidence to commit, knowing there is an option to adjust if their situation changes,” he adds.

The Value of Partnership

Institutional investors are steadily increasing allocations to private markets, particularly infrastructure, private equity, and real assets, signaling a structural shift toward alternatives. At its core is a need for deeper exposure to the real economy, alongside more resilient and diversified returns.

As markets grow more complex, the role of experienced advisors and trusted partners becomes ever more critical. Investors are seeking not just access, but guidance.

“Clients should never feel they are facing these challenges alone,” Saugestad says.

 “Our role is to act as a partner, helping them build portfolios aligned with their objectives, time horizons, and risk profiles. In an uncertain environment, this combination of expertise, access, and long-term perspective can be what turns volatility into opportunity”.

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