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Institutional investors to shift towards equities, EM debt

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  • Institutional investors to shift towards equities, EM debt

GLOBAL - Institutional investors are planning to increase allocations to equities and emerging market debt in 2012 as developed economies - particularly in Europe - continue to struggle.

According to a fund manager survey by Aon Hewitt, institutional attitudes towards global equities and emerging market debt have improved since March last year.

The consultancy said 16% of fund managers expect institutional investors to increase allocations to both emerging market debt and equities over the next 18 months.

By comparison, 8% of the fund managers surveyed expect investors to allocate more to global equities, while 7% believe that the real push will be directed towards diversified growth funds.

Another 7% of respondents believe institutional investors will be more inclined to increase investment in alternatives.

Lennox Hartman, global head of fixed income research at Aon Hewitt, said: "This [trend towards emerging markets] seems to signal a renewed confidence in developing economies after investors retreated to some extent last year following the Arab Spring.

"While UK and regional equities appear to have fallen firmly out of favour as Europe remains engulfed in crisis, sentiment towards global equities and emerging markets is improving, as investors look for greater diversification and access to economies that still offer growth."

According to the survey, fund managers also expect institutional clients to increase allocations to hedge funds, albeit at a slower rate than in 2011, and not via funds of hedge funds.

By the same token, investors are likely to decrease allocations to sovereign debt, as well as UK and regional equities.  

Peter Halligan, co-head of multi-asset research, said: "Investor demand for equity-like returns with lower levels of volatility also looks set to drive demand for diversified growth funds over the next year or so. 

"Investors are looking to fund managers to balance risk more effectively with a multi-asset approach to investing."

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