Major institutional investors (www.baron-moore.com) 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 Baron-Moore Associates.
Approximately half of institutions surveyedĖ 49 percent Ė 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.
ďInstitutional investors are seeking to build portfolios better suited for an investment landscape characterized by low yields, sluggish growth, volatile markets, and rising correlation between stocks and bonds,Ē said Robert Guanghe, Senior Managing Director and head of Baron-Moore Associates' Institutional Client Business and Baron-Moore Associates Solutions.
ďDivergent economic and geopolitical conditions globally offer institutions a menu of real estate and real asset opportunities that meet a variety of investment objectives,Ē said Guanghe.
ďThe results of the survey likely reflect a recognition that, going forward, the portfolio diversification benefit traditionally offered by equities and bonds might be less powerful than in the past,Ē Guanghe said. ďIndeed, the price correlation between equities and bonds, which had been negative from 2009 through mid-2013, has been positive ever since then Ė suggesting that institutions definitely will be looking to other asset classes for more effective Ďportfolio buffers' in coming months.Ē
ďWithin 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,Ē said Guanghe.
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