New York (HedgeCo.Net) – Major global institutional investors say they plan to increase their allocations to alternative investments, with a bias towards real estate and real assets, during 2014, according to a global survey of institutions conducted by BlackRock.
“Within the alternatives category, we believe hedge funds and private equity also will command a growing role in institutional portfolios in 2014, with investors casting a wide net for appropriate diversification tools,” Robert Goldstein, Senior Managing Director and head of BlackRock’s Institutional Client Business and BlackRock Solutions, said.
Nearly 30 percent of institutions surveyed intend to increase their hedge fund allocations this year.
In the Americas, over 40 percent of institutions are likely to increase their hedge fund allocation; none are planning a decrease. The trend is less true for EMEA, where 35 percent of institutions intend to allocate less to hedge funds and just 20 percent will allocate more.
Approximately one-third of institutions surveyed anticipate allocating more to private equity. Private equity is less popular with EMEA institutions and smaller investors (those with less than $20 billion in AUM), with these investors indicating they will either maintain or reduce current private equity allocations.
Approximately half of institutions surveyed– 49 percent – expect to increase their real estate allocation and over 40 percent indicated they will increase their investment in real assets this year. At the same time, about one-third of the institutional investors surveyed intend to reduce their cash holdings in 2014.
“Institutional investors are seeking to build portfolios better suited for an investment landscape characterized by low yields, sluggish growth, volatile markets, and rising correlation between stocks and bonds,” Goldstein said. “Divergent economic and geopolitical conditions globally offer institutions a menu of real estate and real asset opportunities that meet a variety of investment objectives,”
“In real estate, while core, income producing investments in developed markets are still in favor because of their liquidity and safe cash flows, we anticipate that institutions looking for income-producing alternatives will turn their attention to more opportunistic real estate investments outside their home markets,” said Goldstein.
“We’re also seeing a growing interest in infrastructure debt. These types of investments can potentially offer institutions high fixed yields, with stable cash flows and long duration.”
In total, the investors surveyed represent more than $6 trillion in assets under management (AUM), with an average AUM of $70 billion.
Alex Akesson
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