NEW YORK & LONDON & HONG KONG & TORONTO--(BUSINESS WIRE)--
Large institutional investors expect to embrace active management in
2016 to combat macro-economic trends, anticipated market volatility and
divergent monetary policy, a new BlackRock survey has found.
During December 2015, BlackRock polled over 170 of the firm’s largest
institutional clients, representing $6.6 trillion in AUM, about
potential changes to their asset allocations in 2016. The findings also
indicated investors are increasingly embracing illiquid assets,
including private credit and real assets, as a way to meet their
long-dated liabilities.
“Recent market volatility is driving a repricing of assets globally. The
ripple effect from recent events is causing investors to actively manage
risk and seek alternative sources of returns,” commented Mark McCombe,
Senior Managing Director and Global Head of BlackRock’s Institutional
Client Business. “Investors are attempting to look past the current
market environment and find alpha generating opportunities that match
their liabilities.”
Illiquid and alternatives strategies continue to attract clients
seeking additional sources of return
The sectors that saw the largest increase in investor interest were
long-dated illiquid strategies. Led by private credit, with over half of
the respondents indicating an increased allocation, and closely followed
by real assets (53% increase / 4% decrease / +49% net), real estate (47%
increase / 9% decrease / +38% net), and private equity (39% increase /
9% decrease / +30% net) clients expressing demand for the return premia
offered by illiquid assets.
For US and Canadian institutions, the shift towards illiquid assets is
occurring as they reduce their allocations in equities. Investors based
in Europe, the Middle East and Africa (EMEA) are limiting their exposure
to cash and fixed income, while increasing their exposure to real estate
and other real assets.
Despite the muted returns in 2015, allocations to hedge funds remain
fairly steady globally, however there are significant differences
regionally. Overall, institutions globally intend to slightly increase
allocations (20% increase / 16% decrease / +4% net) and US/Canada
institutions intend to increase allocations (30% increase / 19% decrease
/ +11% net). That contrasts with their EMEA counterparts, who intend to
decrease their allocations to hedge funds (6% increase / 15% decrease /
-9% net).
Divest from equities, choose active over index-based
Globally, allocations to equities appear to be decreasing, with some
regional disparity. Respondents globally are planning to decrease their
equity allocations (18% increase / 33% decrease / -15% net). However,
the trend is significantly more pronounced in US and Canadian
institutions with half of the respondents planning to reduce their
equity allocations. For institutions in EMEA, reductions to equity
allocations are more muted (24% increase / 28% decrease / -4% net).
When asked how they plan to manage their equity exposures, 25% of
respondents said they planned on increasing their allocations to active
managers as compared to 16% looking to increase index-based allocations.
Fixed income beyond core/core plus in favor
Within fixed income, institutions are anticipating modest reductions to
their fixed income portfolios (24% increase / 30% decrease / -6% net)
with the majority of that reduction coming from their core allocations
(14% increase / 32% decrease / - 18% net). Assets are flowing out of
core allocations as assets flow into higher yielding sectors such as
private credit (55% increase / 5% decrease / +50% net) securitized
assets (31% increase / 7% decrease / +24% net) and US bank loans (27%
increase / 4% decrease / +23% net).
This trend is more pronounced in Europe, where a net of 17% of
responding institutions are forecasting lower fixed income allocations
(19% increase / 36% decrease / -17% net). Within fixed income, 44% of
EMEA clients plan to decrease their core allocation (with 13% planning
to increase) and 58% plan to increase their investments in private
credit (with 5% planning to decrease). Also within fixed income, 36%
plan on increasing their allocation to US bank loans (with no
respondents planning to decrease) and 34% planning to increase
unconstrained fixed income (with 3% planning to decrease).
Mr. McCombe added: “Many investors are looking to illiquid assets to
insulate themselves from market volatility and reap the rewards of
illiquidity premia.”
About the survey
In December 2015, BlackRock conducted a global survey of 174 of its
largest institutional clients, including public pensions (25%),
corporate pensions (34%), official institutions (1%), insurers (25%),
investment managers (6%), endowments and foundations (7%), and others
(4%). In terms of geographic distribution, 34% of the respondents were
located in North America, 34% in Europe, the Middle East and Africa, 11%
in Asia-Pacific, and 5% in Latin America.
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In 2016, how do you anticipate changing your allocations to
the following?
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Global Findings
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Positive
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Negative
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Net
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Equities
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18%
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-33%
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-15%
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Fixed Income
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24%
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-30%
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-6%
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Hedge Funds
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20%
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-16%
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4%
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Private Equity
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39%
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-9%
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30%
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Real Estate
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47%
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-9%
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38%
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Real Assets
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53%
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-4%
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49%
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Cash
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7%
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-20%
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-13%
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About BlackRock
BlackRock is a global leader in investment management, risk management
and advisory services for institutional and retail clients. At December
31, 2015, BlackRock’s AUM was $4.645 trillion. BlackRock helps clients
around the world 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®. As of December 31, 2015, the firm had approximately 13,000
employees in more than 30 countries and a major presence in 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
| Twitter: @blackrock_news | Blog: www.blackrockblog.com
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View source version on businesswire.com: http://www.businesswire.com/news/home/20160125005960/en/
BlackRock
Olivia Offner, 646-231-0137
olivia.offner@blackrock.com
Source: BlackRock