Investors continue to diversify into riskier assets, according to a survey issued today by bfinance.
The findings of the firm’s Asset Allocation Survey indicate that interest rates in the private market should rise in the short to medium term.
The survey results suggest that a continued shift in global institutional investor allocations will benefit most significantly less liquid strategies and asset classes, followed by fixed income. Investor allocations to equities are expected to decrease over the short to medium term.
Infrastructure appears poised to gain the most in allocations, with 16% of investors responding that they will increase their allocation in this area. Investor allocation to infrastructure is expected to rise to 30% during the next three years, according to bfinance.
“We have been involved in quite a number of meetings with large institutional investors on both sides of the Atlantic and it is clear that there is a desire to bolster allocations to infrastructure,” David Vafai, CEO bfinance said. “Its long-term investment horizon is highly attractive for investors such as pension funds seeking liability-matching assets.”
Increases are also expected for property and private equity asset classes, where 20% and 10% of investors, respectively, signaled their plans for allocation over the next six months. The corresponding three-year figures are 9% and 19%, according to survey results.
Investor responses for commodities, portable alpha, and absolute return strategies show an expected increase over the next three years as well, with 21%, 14% and 18%, respectively, signaling plans to boost allocation.
Equities were the only asset-class to return unfavorable results, with investor responses indicating a 17% decrease in allocation over the next six months and a 37% decrease over the next three years, bfinance said.
“Together with infrastructure, commodities, portable alpha and absolute return strategies are set to be the beneficiaries of a change in investor preferences away from equity. Viewed on their own many of these less liquid strategies carry more risk,” Vafai said. “Combined together, they provide a sought-after diversifier.”
Based in London, bfinance is an independent financial services consulting firm.