The report said this was in response to the prospect of the US Federal Reserve tapering quantitative easing and higher interest rates in the United States. It was found that increasingly positive economic expectations have generated interest in assets such as direct real estate, private equity, direct infrastructure and infrastructure debt.
AMP Capital chief executive Anthony Fasso said equities and fixed income still held the largest share of asset allocation, with 41 per cent of respondent’s portfolios in equities and 31 per cent in fixed income.
“The survey has found, however, investors are favouring investments that offer value, potential for capital growth and predictable, consistent yields as global economies continue to improve,” said Mr Fasso. He said investors were therefore allocating more funds to alternatives and to real assets.
“One appeal of real assets is their tangibility, which offers greater stability and insulation from the risk of public equity markets,” said Mr Fasso.
Most respondents surveyed were still heavily exposed to public equities and debt, but almost a third of the respondents said they planned to reduce their allocations to domestic government or corporate bonds in favour of high-yield corporate bonds. One quarter of respondents’ portfolios were invested in foreign and global equities, 16 per cent in domestic stocks, 14 per cent in foreign/global fixed income and 17 per cent in domestic fixed income.
According to the report, assets such as infrastructure, direct real estate and private equity would benefit from investors reallocating assets away from government bonds.
The report found demand for real estate was strong, particularly in Europe. Forty-one per cent of respondents in Europe said they were seeking to increase their direct real estate investments, followed by Asia at 29 per cent. Based on the report, North American institutions are still the biggest investors in direct real estate with an average allocation of eight per cent compared with five per cent in Europe and just two per cent for Asia.
Mr Fasso said many investors planned to allocate additional assets to regional hotspots such as Europe.
“They see undervalued stocks and bonds, with valuations there now more attractive after the sell-off in recent years,” said Mr Fasso.
He also said sophisticated investors were using hedge funds to maximise equity returns and provide downside protection. He said Asian quant funds were particularly popular.
“While quant markets are well established in America and Europe, they are less so in Asia where their comparative absence has created opportunities,” Mr Fasso added.
