More than two-thirds (68%) of institutional investors said they will take advantage of higher interest rates by increasing their allocations to public fixed-income investments over the next 24 months, according to a report issued by Cerulli Associates on Dec. 8.
The report, "North American Institutional Markets 2023: Abundant Opportunities Despite Asset Declines," also found that nearly three-fourths (70%) of institutional investors plan to increase their allocations to actively managed fixed-income strategies over the next 24 months.
"This presents a significant opportunity for asset managers with strong fixed-income capabilities and performance," said Chris Swansey, senior analyst-institutional, in a news release issued in tandem with the report.
In addition, more than half (55%) of institutional investors are reacting to climbing interest rates by planning to increase their allocations to alternative investments. Private credit strategies have become especially attractive – almost one-half (47%) expect to increase their allocation to the asset class over the next 24 months.
Also, 57% of institutional investors expect to increase their portfolio duration in the next 24 months.
In addition, the report found that active equity investment strategies remain popular among institutional investors. A vast majority (79%) of institutional investors expect to increase their allocations such strategies over the next 24 months.
"With portfolios designed to enhance returns over the long term, institutional investors are prepared to withstand short-term economic shocks," added Swansey. "This allows them to be opportunistic during times of market volatility and take advantage of lower-than-normal valuations."
For the report, Cerulli gathered survey responses from 200 institutional investment firms. Each participant had more than $100 million in total AUM, a spokesperson said.
