More than half (61 per cent) of institutional investors think equities are peaking as 2019 gets rolling, according to research from Preqin.
This number has been on the rise during the past 18 months, potentially hinting markets are due for a correction, the report noted. “It’s no surprise that this is throwing the role of alternative assets into sharper focus – among the advantages that investors cite are its long-term performance, diversification and non-correlation; key tools for capital protection in the face of a downturn,” said Amy Bensted, head of data products at Preqin, in a release.
Currently, 82 per cent of investors have committed capital to at least one alternative asset class. The three most popular are private equity (70 per cent), real estate (64 per cent) and hedge funds (51 per cent). Meanwhile, one third of investors each allocate to natural resources, private debt and real estate. Further, the majority of investors noted they intend to increase their allocations to alternatives in the longer term, the report found.
Diversification is the most popular reason for making alternative allocations, but this varies depending on the asset class, the report said, noting 73 per cent of real estate and infrastructure investors gave diversification as a reason, while just 56 per cent of private equity investors said the same.
“The general outlook is positive for the industry: investors have turned increasingly to alternatives through the long boom period, and their appetite does not look set to diminish with the onset of more difficult times.,” added Bensted. “Indeed, the industry is likely to play a key role in helping institutions navigate short-term headwinds. But this appetite comes with greater scrutiny: across all asset classes, investors are putting their faith in experienced fund managers and truly non-correlated strategies, adding to the challenges facing less experienced managers and more trend-following strategies.”