This year, institutional investors around the world plan to increase their allocations to alternative assets, particularly towards real estate and real assets, according to a BlackRock survey.
The study finds that 49% of institutional investors expect to boost their real estate allocations and over 40% plan to increase their investment in real assets in 2014. At the same time, about one-third of respondents intend to reduce their cash holdings this year
“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,” says Robert Goldstein, senior managing director and head of BlackRock’s institutional client business and BlackRock Solutions.
In real estate, core, income-producing investments in developed markets are still in favor because of their liquidity and safe cash flows, but institutions looking for income-producing alternatives will likely focus on more opportunistic investments outside their home markets, Goldstein explains.
“We’re also seeing a growing interest in infrastructure debt,” he adds. “These types of investments can potentially offer institutions high fixed yields, with stable cash flows and long duration.”
Hedge funds and private equity will also play a bigger role in institutional portfolios. Nearly 30% of institutions surveyed plan to boost their hedge fund allocations this year. Approximately one-third of investors anticipate allocating more to private equity.
The survey polled approximately 100 institutional investors.
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