As much as $500 billion of U.S. institutional investors' money could flow out of U.S. large-cap equities over the next three to five years and more toward global mandates, according to a recent Bank of America Merrill Lynch survey.
Forty-two percent of 111 institutional managers for U.S. corporate and public pension plans, endowments and foundations said they plan to increase their allocation to international equities over the next 12 months, making it the most desirable asset class. Also, 39% plan to reduce their allocations to U.S. large-cap equities, which could result in a $300 billion to $500 billion drop in the class over the next three to five years.
Flows into hedge funds were up about $1 billion for the third quarter.
Survey respondents said among hedge fund strategies they were most interested in distressed debt (30%), long-short equities (28%) and macro hedge fund strategies (23%).
Research analyst John Haugh could not be reached for comment by press time.