Institutional investors plan to step up the pace of their retreat from public equities this year, seeking instead higher allocations to real estate and private equity, according to a new wide-scale survey.

BlackRock’s annual survey of global institutions – including responses from 230 of its clients representing more than $7trn (€6.1trn) of assets – revealed that more than half intended to slash their allocations to public equities in 2019.

This shift is accelerating compared to previous surveys, with 35% of respondents having planned such cuts in 2018, and 29% in 2017.

“This trend is most pronounced in the US and Canada, where over two thirds (68%) plan to reduce equity allocations, compared to just 27% in continental Europe,” BlackRock said.

Just over half of respondents – 63% of which were pension funds – said one of the most important macro risks influencing their asset allocation plans was the possibility of the economic cycle changing.

“In a continuation of a multi-year structural trend of reallocating risk in search of uncorrelated returns, illiquid alternatives are set to see further inflows, with 54% intending to increase exposure to real assets, 47% to private equity, and 40% to real estate,” BlackRock said.

Intended increases to fixed income allocations rose to 38% this year from 29% in the 2018 survey, and within fixed income, the poll showed that 56% planned to expand the proportion of private credit they held.

Edwin Conway, global head of institutional client business at BlackRock, said: “The move into fixed income is especially pronounced for corporate pensions, as many defined benefit plans are focused on de-risking, locking in improvements to funded status, and preparing for an end-game.”

Apart from the prominent shift away from public market risk illustrated by the survey, many institutional investors were also shown to be moving towards alpha-seeking strategies and focusing more on environmental, social and corporate governance-related (ESG) strategies.

A third (32%) said they planned to increase allocations to alpha-seeking strategies, while 28% said ESG was a focus.

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