Institutional investors to pursue active approach in 2018
Large global institutional investors will pursue active strategies in 2018 and protect themselves against downturn risks through maintaining their cash levels, according to BlackRock’s survey.
The study, which surveyed 224 institutional clients representing US$7.4 trillion, revealed that 65 per cent would leave cash allocations unchanged for the year ahead along with showing an interest in active management.
As far as the private market universe for institutional clients was concerned, illiquid or real assets would remain the frontrunner and would be expected to be the largest beneficiary of asset flows.
Three fifths of the survey clients also said they planned to increase their allocations to infrastructure and renewables, with 42 per cent of institutions hoping to increase their allocations to real estate.
At the same time, over two fifths expressed an increased interest in private equity.
The survey also found that hedge funds had appeared to make a comeback with investors shifting their opinions on the subject from an intended decrease in 2017 to an anticipated increase in 2018.
As a result, 20 per cent of surveyed institutional clients would plan to increase their allocations to hedge funds in 2018, BlackRock said.
Also, alternative forms of credit such as private credit would remain attractive, with 58 per cent of respondents looking to increase allocations to that segment.
BlackRock’s global head of institutional client business, Edwin Conway, said: “Clients’ intention to reallocate to private markets and other highly active strategies is a recognition that global risks persist and of the value of portfolio managers’ skill.
“Maintaining current cash levels and increasing allocations to active managers may seem counterintuitive. But for many of our clients, it’s their two-pronged strategy for navigating risk and potentially volatile markets.”
AUTHOR
Oksana Patron
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
