One-quarter of the surveyed institutional investors said they plan to decrease their cash holdings, with only 13 per cent looking to increase their allocation to the asset class, the company found.
“The survey shows a clear trend that this cash will be deployed in 2017, with institutional investors anticipating making significant shifts to less liquid assets,” the company said.
“Investors are also looking to allocate to higher yielding areas, and are increasingly considering non-traditional asset classes.”
BlackRock global head of the institutional client business Edwin Conway said less liquid assets were becoming increasingly popular as investors sought new ways to generate returns.
“The recent equities rally has been more than offset by years of low rates and many institutions are still suffering from underfunding. In the past year, investors have been challenged by global equities underperformance and negative fixed income returns,” he said.
“On top of this added pressure to deliver returns, reflation is set to take root this year and could well be the final prompt that institutions have needed to rethink their cash allocations and views on risk.”
Real assets are expected to see the most significant uptake, with 61 per cent of surveyed investors looking to increase their exposure to this class compared with 3 per cent looking to reduce it, the company said.
Additionally, 47 per cent of investors expect to increase their real estate allocations, with only 9 per cent looking to decrease their holdings.
“Institutional investors are recognising that they need to do something different to get the investment outcomes they want,” said Mr Conway.
“With market volatility and lower returns expected from traditional asset classes for the near future, investors are having to look elsewhere for yield, they are increasingly seeking alternative income, and are embracing less liquid strategies to enhance returns.”
FASEA appoints new chief executive
David Murray commences new role as AMP chairman
ANZ names new group treasurer
Super shouldn’t be a lottery
Can infrastructure equities cope with rising rates?
Is this as good as it gets?