More Canadian institutional investors plan to increase their exposures to alternative investments over the next 12 months compared to global investors overall, according to a report from CIBC Mellon.
The report, "Race for Assets: Canada vs. the World," shows that 58% of surveyed Canadian investors plan to increase their overall allocations to alternative investments, while 42% expect them to remain the same. No respondents said they would decrease those allocations. The numbers, according to the report, show a greater zeal among Canadian investors than those around the globe, where only 53% of respondents said they planned to increase their overall allocations. The global number comes from BNY Mellon's 2017 "Race for Assets" report.
Specifically, investors seem to favor increasing allocations to private equity to an average 20.9% from the current average of 18.7%, infrastructure to 20.2% from 20%, private debt/loans to 18.5% from 17.9% and hedge funds to 1.6% from 1.4%. Only real estate is expected to drop to an average allocation of 38.8% from the current average of 42%.
When asked whether these asset classes performed better, the same or worse than expected over the last 12 months, real estate was only one of three asset classes in which some number of respondents felt it did worse than expected. Thirty percent of respondents felt real estate did worse than expected, while 58% said it performed as expected and 12% said better than expected. Infrastructure and private debt loans had 17% and 4%, respectively, of respondents said those performed worse than expected.
The most pleasant surprise, on the other hand, was hedge funds, which saw the largest percentage — 36% — said the asset class performed better than expected. Sixty-four percent of respondents said they performed as expected.
"Alternatives continue to gain momentum among Canada's institutional investors as they seek investments that can shelter their capital from short-term risks and market movements while also generating strong returns, though we are seeing Canadian investors becoming more particular about how they deploy their capital," said Jon Lofto, director of alternatives at CIBC Mellon, in a news release announcing the report.
CIBC Mellon surveyed 50 Canadian institutional investors. Those included pension fund and pension fund trustees, fund managers, endowments and foundations and insurance companies. Respondents had a median assets under management of $3.2 billion and a minimum $330 million.
The report is available on CIBC Mellon's website.