Institutional investors are investing less in public markets and more in alternatives as they react to the prospect of tapering by the US Federal Reserve andhigher interest rates in the US and Europe, according to the AMP Capital Institutional Investor Research Report.
Direct real estate, private equity, direct infrastructure and infrastructure debt are all receiving greater interest on the back of more positive economic expectations.
AMP Capital chief executive international and head of global clients Anthony Fasso says: “Equities and fixed income still have the lion’s share of asset allocations, with 41% of respondents’ portfolios in equities and 31% in fixed income.
“The survey has found, however, investors favour investments that offer value, potential for capital growth and predictable, consistent yields as global economies continue to improve. As such, they are allocating more to alternatives and, in particular, real assets.
An appeal of real assets, says Fasso, is their tangibility, which offers greater stability and insulation from the risk of public equity markets.
“Investors are expecting to reduce their fixed income holdings especially in government and investment grade corporate bonds. Many respondents to the survey said these investments hadn’t met expectations during the past year.”
Demand for real estate was particularly strong in Europe, with almost 41% of respondents seeking to increase their direct real estate investments, followed by Asia (29%) and North America (17%).
Forty-two per cent of respondents said it was likely they would invest in infrastructure debt during the next two years. Demand is strongest from institutions in Europe but is growing in Asia and North America.
The respondents were contacted during the second quarter of 2013 and more than 65 senior decision makers from large institutions globally were surveyed. Collectively they manage an estimated $2.1 trillion (€1.5 trillion) and 89% of respondents were employed by firms with US$1 billion or more in assets under management.
©2013 funds europe