Chief investment officers overseeing U.S. institutional portfolios have growing interest in “barbell” allocations to indexed equities and high-alpha alternatives, at the expense of active long-only domestic equity strategies, according to a Keefe, Bruyette & Woods survey.
Among the 51 CIOs surveyed in May, slightly fewer than 60% expect to decrease their allocations to active long-only equities over the coming three years, with more than 30% predicting “no change” and less than 10% expected to boost allocations.
Roughly 50% said they’ll increase allocations to hedge funds, with well over 40% expecting no change and a scant few percent saying they’ll decrease allocations. The same pattern held true for both private equity and real estate allocations.
Flows into passive equity strategies, meanwhile, look set to increase, with 37% of respondents predicting either a modest or significant increase and 19% expecting a decrease.
The report pointed to BlackRock, Blackstone Group and Och-Ziff Capital Management as firms “particularly well positioned” to benefit from those trends.
In an interview, Rob Lee, senior vice president for asset management at KBW and the author of the report, said the U.S. investor-focused survey doesn’t give as full a picture as it would if others, such as sovereign wealth funds or Japanese pension funds, were included. Even if the active long-only domestic equity segment becomes a take-away game, there will be winners and losers there, he said.