Large institutional investors are looking to boost allocations to alternatives in 2014, specifically real estate and real assets, according to a BlackRock global survey of about 100 investors with more than $6 trillion in assets under management combined.
Forty-nine percent of respondents expect to increase their real estate allocations and 40% said they will increase real assets. Josh Levine, managing director and co-head of pensions, said the results go hand in hand with the major trends of diversification in moving away from stocks and bonds. He added the percentage increase was a little surprising for those asset classes, but that it makes sense because investors are looking for strategies that produce income, stability and duration.
“There is a desire for diversification and a desire for growth on assets with a lower volatility than equities,” Mr. Levine said in a telephone interview. Investors are also increasingly looking away from domestic markets, he said.
Among pension funds, which made up 59% of the survey, 33% plan to increase fixed-income allocations, compared to 24%, decrease. For equities, 20% said they would increase allocations compared to 41%, decrease. Mr. Levine said the results reflect the desire of pension funds, specifically corporate plans, to implement liability-driven investing and derisking strategies.
More hedge fund and private equity investing is expected this year as well, although the trend differs greatly between investors in the Americas and Europe, the Middle East and Africa. More than 40% of investors in the Americas expect to increase hedge fund allocations with none decreasing. Only 20% will invest more in EMEA countries and 35% expect to decrease allocations. About 33% of overall investors plan to increase private equity investments, but EMEA countries and investors with less than $20 billion AUM are more likely to maintain or decrease allocations.
