Institutional investors are continuing their shift toward emerging markets and alternative strategies such as long-short equity, macro funds and special situations, at the expense of U.S. equity, according to a Deutsche Bank survey.
Forty-six percent of respondents anticipate increases to emerging markets and 41% for hedge funds over the next 12 months. Meanwhile, 44% said they would like to decrease their exposure to U.S. large-cap equities, and 38% said they would like to reduce exposure to small-cap equities.
Also, 15% plan increases to hedge funds of funds, while another 15% anticipate a decrease in the asset class. “This shows that there are investors who have been invested in alternatives via fund-of-funds who have become more sophisticated and are now looking to move to direct hedge fund investment,” the report states.
Respondents also noted that interest rates would have to increase 200 basis points to make liability-driven investment strategies feasible.
The survey of 103 institutional investors with combined assets of $1.2 trillion was conducted in mid-September. Thirty-nine percent of respondents were from corporate pension plans, 27% public pension plans, 17% endowments, 12% foundations and the remainder from other institutions.