Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Canadian Pension Risk Strategies
    • 2023 Retirement Income
Breadcrumb
  1. Home
  2. INVESTING & PORTFOLIO STRATEGIES
November 25, 2016 12:00 AM

Election not expected to slow move to alts

But inflation-sensitive assets gain interest

James Comtois
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    “Dramatic changes based on this election would be premature."

    The election of Donald J. Trump as the next U.S. president has not changed economic or market expectations enough to slow the migration to illiquid assets by institutional asset owners searching for investment returns.

    But it does appear to have pushed some investors to begin research into considering inflation-sensitive assets.

    “We've seen investors stay the course. (Pension funds) are long-term investors that are very focused on their liability streams and their funded status. So they have investment policies built for the long term,” said Josh Levine, head of alternatives specialists for the Americas at BlackRock Inc.

    Mr. Levine said the results of a survey of BlackRock's institutional clients are being compiled and will be released in January 2017, but he foresees institutional appetite for alternative assets will continue to grow.

    A prior survey last January indicated a net 50% of BlackRock's clients would increase allocations to private credit, while a net 49%, 38% and 30% of respondents said they would increase allocations to real assets, real estate and private equity respectively in 2016.

    That said, the BlackRock managing director noted he's seeing clients interested in exploring assets that are sensitive to inflation. “They're beginning to research some themes,” Mr. Levine said. “But we're in the first inning on that.”

    In October, results of the third-quarter endowment and foundation poll by Boston-based investment consultant NEPC LLC indicated 43% of respondents would be increasing allocations to private equity while 53% would maintain their current exposure. Only 4% of respondents planned on a decrease.

    “Investors have been going more into private markets to achieve returns. I don't think you're going to see that changing,” said Catherine M. Konicki, a partner and head of the endowment and foundation practice at NEPC in a phone interview. She added that because the lifespan of most private market investments averages 10 to 12 years, most investments in illiquid assets will outlast any short-term market volatility caused by a presidential administration of four to eight years.

    Watchful eye

    A number of asset owners that Pensions & Investments contacted said Mr. Trump's win shouldn't change things — although they will be watching.

    Theodore Eliopoulos, chief investment officer of the $299.5 billion California Public Employees' Retirement System, Sacramento, told the system's investment committee on Nov. 14 he saw no reason for further changes in the system's investment allocations and profile, which had been recently adjusted.

    “Dramatic changes based on this election would be premature as there are too many questions left to be answered in the coming months and years,” he said.

    Mr. Eliopoulos added: “It would be wise, however, to incorporate into our investment outlook higher potential volatility across many capital markets as a result of the increased uncertainty around economic policies going forward.”

    He also noted CalPERS needs to prepare to address a much different policy environment, new economic and investment challenges and opportunities, and be ready to adjust, act and govern itself accordingly.

    Mr. Eliopoulos also asked the retirement system's senior private equity staff to explore such options as cutting out general partners and making direct private equity investments.

    In September, the Rhode Island State Investment Commission, Providence, increased exposure to private equity to 12% from 7% over the next five years as part of a new asset allocation for the $7.7 billion Rhode Island Employees' Retirement System.

    Evan England, spokesman for Rhode Island state Treasurer Seth Magaziner, who chairs the commission, said Mr. Trump's win won't affect the broad strategy, but it's something the commission will continue to monitor.

    “There's always concern of volatility. There's been greater concern in recent weeks,” he said. “When conducting this recent allocation, we took many factors into consideration, including market volatility.”

    David Villa, chief investment officer of the $102 billion State of Wisconsin Investment Board, Madison, said in an e-mail: “The investment committee is following the transition process closely but the fund's investment horizon is long term. It is too early to be changing direction before the administration and Congress pass new legislation, tax policy and regulations.”

    Mr. Villa added: “Even once the policy outlook is clarified, the asset allocation to illiquid assets is unlikely to change as the strategy is to maintain diversification across each vintage year through time.”

    SWIB had 8% of its investment portfolio allocated to private equity as of Sept. 30, 2015, according to data from P&I's Research Center.

    James Sinks, spokesman for Oregon Treasurer Ted Wheeler, chairman of the Oregon Retirement Savings Board, Tigard, which runs the $68.3 billion Oregon Public Employees Retirement Fund, Salem, said in an e-mail: “The election has had no impact on either our asset allocation or implementation strategies.”

    Institutional investors began the move years ago toward illiquid assets such as private equity, real estate, hedge funds, private credit and infrastructure. And it's only going to grow as investment markets continue to offer relatively low returns.

    “Larger institutions are getting more into illiquids,” said John Bilton, global head of multiasset strategy at J.P. Morgan Asset Management at a lunch briefing on 2017 long-term capital market return assumptions the asset manager hosed in New York on Nov. 1.

    Jed Laskowitz, co-head of multiasset solutions at JPMAM, said in a phone interview that he didn't think a Trump victory has changed JPMAM's long-term outlook for volatility or the firm's other assumptions. Investors are still going to have to be creative in order to find returns.

    “We think we're entering an environment that will offer lower return from beta than we saw in last 10 years,” he added.

    Mr. Laskowitz noted that returns from a typical 60/40 equity/bond investment portfolio averaged a return of about 8% from 2004 to 2014. Over the next 10 years, that average return is expected to be about 5.5%. And a pension plan that needs a return of 7% to 8% annually is going to have to turn to illiquid assets in order to achieve such returns.

    Related Articles
    BlackRock: Institutional clients looking to up illiquid allocations in 2016
    Colorado Fire & Police increases target allocation to illiquid alternatives
    CalPERS mulls going direct in private equity
    Trump picks Mnuchin as treasury secretary, Ross for commerce
    Fidelity: Institutional investors looking to increase alts, bonds over next 2 y…
    The art of the deal
    Pew: State pension funds paying for increased alternatives allocations
    Recommended for You
    More funds testing water on crypto-related assets
    More funds testing water on crypto-related assets
    Money managers eager to make leap to opportunity zone investing
    Money managers eager to make leap to opportunity zone investing
    Index investing: Not as passive as you might think
    Index investing: Not as passive as you might think
    Quest for Quality Amid Market Turmoil
    Sponsored Content: Quest for Quality Amid Market Turmoil

    Reader Poll

    May 1, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    Counting on a Crisis: A Catalyst for Investment Innovation?
    A Strategic Allocator's Guide to Productivity and Profits
    Biodiversity: why investors should care
    Quantifying sustainability – the numbers, the data, and the people
    Valuing Banks: Hidden Losses Versus Assets
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Canadian Pension Risk Strategies
      • 2023 Retirement Income