More than two-fifths (44 per cent) of North American institutional investors say they’re likely to increase allocations to alternative investments, citing high inflation (89 per cent) and expectations of lower returns (86 per cent), according to a new survey by Cerulli Associates.

The survey’s respondents said they plan to increase allocations to infrastructure (28 per cent) and real estate investments (26 per cent) to hedge against inflation, while increasing allocations to private equity (20 per cent), private debt (20 per cent) and hedge funds (18 per cent) to bolster returns.

Read: Majority of institutional investors say alternative asset managers are meeting, exceeding expectations in 2022: survey

When asked what qualities they’re seeking in an alternative asset manager, respondents indicated specialization in a specific asset class (96 per cent), strong performance (94 per cent) and competitive fees (92 per cent).

The survey also found investors are likely to see an increased pressure on fees, as the vast majority (94 per cent) of respondents said they negotiate management fees and are doing so on a mandate-by-mandate basis during the sales process.

“Institutional investors are operating in a significantly different market environment in 2022 than they had been over the last several years as a result of persistent inflation,” said Chris Swansey, senior analyst at Cerulli, in a press release. “Many institutions are evaluating investment options that help prevent decreases in assets or funded statuses.”

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