Institutional investors shifting assets to private markets: Poll

BlackRock clients cite economic concerns as they cut allocation to public assets in portfolio targets

Fears of an economic downturn are prompting increasing numbers of institutional investors to shift assets from public markets to the private sphere, a new survey shows.

It found that 51 per cent of those polled intend to decrease their allocation to public equities this year.

The same survey in previous years found that only 35 per cent had planned such a move for 2018 and 29 per cent for 2017.

The trend is greatest in the United States and Canada where 68 per cent plan to do so, compared to 40 per cent in Asia-Pacific and 27 per cent in continental Europe.

Asset manager BlackRock conducted the poll among 230 of its largest institutional clients, representing more than US$7 trillion (S$9.5 trillion) in assets.

It noted that 56 per cent of respondents overall cited the possibility of the economic cycle turning as the key influence on their rebalancing and asset allocation plans. The level among Asia-Pacific respondents was 60 per cent.

The rebalancing will include increased allocations in three main areas, with 54 per cent aiming for real assets such as infrastructure, 47 per cent opting for private equity and 40 per cent targeting real estate.

These three areas were similarly popular in the Asia-Pacific region, with 65 per cent of respondents in the region intending to increase exposure to real assets, 44 per cent to real estate and 40 per cent to private equity.

The poll also noted that 38 per cent of investors are looking to increase fixed-income allocations, up from 29 per cent last year.

Respondents also expect to boost allocations to other fixed-income areas, such as short duration (30 per cent), securitised assets (27 per cent) and emerging markets (29 per cent), "likely reflecting relative value opportunities in these asset classes", said BlackRock.

However, most institutions want to maintain (65 per cent) or even increase (20 per cent) their cash levels in 2019, especially in the Asia-Pacific region, where a third of respondents plan to lift their cash holdings to protect their portfolios.

Institutions are also changing their focus within equity portfolios.

The top three aims are to reduce public market risk (41 per cent), to increase allocations to higher-returning products (32 per cent) and to focus more on environmental, social and governance strategies and impact investing (28 per cent).

Asia-Pacific respondents had the same top two priorities but their third biggest concern was increasing diversification and reducing home market bias (27 per cent).

The survey was conducted in November and early December last year. Assets from Asia-Pacific institutions represent a quarter of the total assets owned by all survey respondents.

A version of this article appeared in the print edition of The Straits Times on January 08, 2019, with the headline 'Institutional investors shifting assets to private markets: Poll'. Print Edition | Subscribe