GREENWICH, Conn. — Institutional investors inched back into domestic stocks last year, focusing particularly on indexing, while cutting fixed-income allocations, according to a new report on asset allocation strategies from consultant Greenwich Associates.
The report is based on interviews with executives of more than 1,000 of the largest corporate and public pension funds, endowments and foundations, with assets totaling $5.3 trillion. The interviews were conducted last September and October.
The survey also showed how little asset allocations changed in 2003, in large part because nearly 80% of respondents rebalanced back to their target allocations, Rodger Smith, managing director at Greenwich, said in an interview.
"Over the next three years, around 30% said they plan to make significant changes in asset allocation, mainly by increasing their allocations to international equities and alternatives, including real estate equity, private equity and hedge funds," Mr. Smith said.
In 2003, these investors refocused their asset allocations slightly from the days of the bull market.
"But the modest reallocations away from domestic equity to fixed income after the market slumped in 2000 appear to have run their course," Greenwich consultant Chris McNickle said in the report.
"The main difference between current allocations and those of the earlier bull market is that now these funds are concentrating on approaches that might add a little zing to the returns," Mr. McNickle noted. Within domestic equity portfolios, enhanced indexing increased the most, jumping to 9.9% of domestic equity portfolios from 5.9% the previous year.