Major institutional investors around the world are poised 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 (NYSE:BLK).
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,” said Robert Goldstein, Senior Managing Director and head of
BlackRock’s Institutional Client Business and BlackRock Solutions.
“Divergent economic and geopolitical conditions globally offer
institutions a menu of real estate and real asset opportunities that
meet a variety of investment objectives,” said Goldstein.
“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.”
Seeking Out Better “Portfolio Buffers”
“The results of the survey likely reflect a recognition that, going
forward, the portfolio diversification benefit traditionally offered by
equities and bonds might be less powerful than in the past,” Goldstein
said. “Indeed, the price correlation between US equities and bonds,
which had been negative from 2009 through mid-2013, has been positive
ever since then – suggesting that institutions definitely will be
looking to other asset classes for more effective ‘portfolio buffers’ in
coming months.”
A Growing Interest in Hedge Funds and Private Equity
“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,” said Goldstein.
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 is 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.
About the Survey
BlackRock surveyed approximately 100 institutional investors
representing the firm’s Americas, Europe/Middle East/Africa (EMEA), and
Asia-Pacific (APAC) markets, including corporate and private pension
funds, insurers, investment managers, and government entities. In total,
the investors surveyed represent more than $6 trillion in assets under
management (AUM), with an average AUM of $70 billion.
About BlackRock
BlackRock is a leader in investment management, risk management and
advisory services for institutional and retail clients worldwide. At
December 31, 2013, BlackRock’s AUM was $4.324 trillion. BlackRock helps
clients meet their goals and overcome challenges with a range of
products that include separate accounts, mutual funds, iShares®
(exchange-traded funds), and other pooled investment vehicles. BlackRock
also offers risk management, advisory and enterprise investment system
services to a broad base of institutional investors through BlackRock
Solutions®. Headquartered in New York City, as of December 31, 2013, the
firm had approximately 11,400 employees in more than 30 countries and a
major presence in key global markets, including North and South America,
Europe, Asia, Australia and the Middle East and Africa. For additional
information, please visit the Company’s website at www.blackrock.com.
Disclaimer
This material represents an assessment of the market environment at a
specific time and is not intended to be a forecast of future events or a
guarantee of future results. This information should not be relied upon
by the reader as research or investment advice. Investing in alternative
investments involves higher risks than traditional investments and may
not be suitable for all investors. Alternative investments may be highly
leveraged and engage in speculative investment techniques, which an
magnify the potential for investment loss or gain.
BlackRock® is a registered trademark of BlackRock, Inc. All other
trademarks are the property of their respective owners.
© 2014 BlackRock, Inc. All rights reserved.
Copyright Business Wire 2014