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MONEY MANAGEMENT

Institutional investors decreasing cash, investing in less liquid strategies in 2017 — survey

Large institutional investors are looking to put more of their cash to work this year, according to the results of a BlackRock (BLK) survey.

BlackRock surveyed 240 of its global institutional clients, representing more than $8 trillion in assets, in November and December.

One in four institutions surveyed intend to decrease their cash allocations during the year, which is about twice as many as the 13% that plan to increase their cash holdings, according to the money manager's survey. The survey shows a trend that this cash will be deployed in 2017, with institutional investors.

Institutional investors anticipate making significant shifts to less liquid assets and higher-yielding strategies, the survey said.

Real assets are anticipated to be the largest beneficiaries of institutional asset flows in 2017, with a net 58% of those surveyed expecting to increase their allocations in the U.S. Only 3% of investors plan to decrease allocations. A net 49% of investors expected to increase their allocations in 2016.

Real estate is also set to see significant interest, with 47% of investors globally looking to increase allocations to the asset class, and only 9% looking to decrease allocations.

The survey revealed that private equity flows are also looking positive, with 48% of global investors planning to increase their holdings, and only 13% looking to reduce allocations.

Within fixed income, there is a clear global trend showing a move away from core assets and toward strategies with the potential to yield higher returns, according to BlackRock. Private credit is the clear frontrunner for fixed income, across all regions and investor types, as the area where institutions expect to increase holdings — 61% — with only 4% looking to decrease.

Globally, corporate pension funds are decreasing their allocations to hedge funds (-22% net), especially in the U.K. and the U.S., and moving toward long-duration bonds, likely pointing to de-risking trends, the survey said.

Globally, 28% of investors surveyed intend to increase their allocations to active equities relative to passive equities, with more than half — 55% — planning to keep their current mix of active and passive strategies constant. Seventeen percent intend to increase their allocation to passive strategies.

Of the 240 respondents, 33% were corporate pension plans, 25% insurers, 23% public pension plans, 7% investment managers, 4% official institutions, 4% endowments and foundations, and 4% other. In terms of geographic distribution, 39% of the respondents were located in North America, 38% in Europe, the Middle East and Africa, 13% in Asia-Pacific and 10% in Latin America.