Investment consultants serving North American institutional investors expect 2011 search activity to focus on areas such as alternatives, emerging markets and strategies that provide a hedge against inflation.
The results of Casey Quirk & Associates and eVestment Alliance’s fifth annual survey of investment consultants in the U.S. and Canada showed more than 80% of the 55 consulting firms that responded predicting their clients will continue working to boost their non-U.S. equity exposure this year.
Alternatives — hedge funds, private equity and real estate — will likewise continue taking on a more central role in institutional portfolios, “emerging as the centerpiece of active asset management moving forward,” according to a report released Thursday on the survey results.
In a telephone interview, Yariv Itah, a partner with Casey Quirk, said one interesting finding was the expectation among consultants that searches for illiquid alternatives such as real estate and private equity could pick up sharply this year.
Consultants appear to be less concerned about illiquidity risk than risks associated with inflation, interest rates or currencies, Mr. Itah said, perhaps reflecting the view that real estate and private equity offer tactical opportunities following a rough post-crisis period for those asset segments.
Search activity for emerging markets equities is expected to continue picking up this year, but consultants predict an even stronger year-on-year gain for emerging markets debt, Mr. Itah noted.
Searches for domestic equity, domestic fixed-income and non-U.S. developed country strategies, while considerable, will in more than 50% of cases likely reflect replacement activity rather than additional allocations, the survey said.