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.
“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 Robert Goldstein, Senior Managing Director and head of BlackRock’s Institutional Client Business and BlackRock Solutions.
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.
“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 Mr. 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.”
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.
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.
BlackRock is an investment management, risk management and advisory services company with institutional and retail clients worldwide. At December 31, 2013, BlackRock’s AUM was $4.3 trillion. BlackRock is headquartered in New York (www.blackrock.com).
© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14