Demand for equities double but infrastructure mandates fall, report finds

A report by consultancy Bfinance has found that demand for equities has doubled for institutional investors but infrastructure mandates saw a 15% fall in the last year.

The firm’s report – Manager intelligence and market trends - May 2024 – analysed institutional investors’ asset manager search activity from bfinance’s investor client base in 45 countries.

Among investor clients, bfinance noted a surge in equity manager search activity. This asset class represented 33% of all manager searches by its global investor client base – which includes pensions, endowments, insurers, family offices and more – for the 12 months to end-March 2024, up from 17% for the previous 12 months.

Bfinance said this surge does not just reflect confidence in equity markets, but more importantly investors have been evaluating and adapting portfolios for the long-term.

It added that anecdotal evidence indicates that investors have been moving ahead with repositioning that was planned during 2022-23 amid a fundamentally altered macroeconomic environment.

Another key driver of activity has been the implementation of carbon, climate and even impact objectives and the improvement in available strategies, according to the report.

However, new manager searches for private market asset classes dipped to 43% of all bfinance client mandates for the 12 months to 31 March, which it said is still a “strong figure” but below the all-time peak of 58% the previous year.

“As investors continue down the path of strategic re-alignment for a new macroeconomic era, we have witnessed a significant increase in demand for equity managers”

Kathryn Saklatvala, director and head of investment content at bfinance

This, it said, reflects an industry-wide softening of private markets fundraising. The decline was particularly visible for searches targeting the infrastructure asset class: this sector represented just 7% of private markets searches (3% of all bfinance client mandates), down from 22% of private market searches (13% of all mandates) the previous year.

Private debt and private equity search activity, however, remained very robust, with investors drawn to illiquid credit as a wave of ‘debanking’ has helped managers to maintain attractive spreads even with higher interest rates.

Moreover, sentiment towards real estate has visibly warmed in the first quarter of 2024, and natural capital search activity – very high by historical standards in 2023 – continued to be strong into 2024.

Kathryn Saklatvala, director and head of investment content at bfinance, said: “As investors continue down the path of strategic re-alignment for a new macroeconomic era, we have witnessed a significant increase in demand for equity managers. This also reflects an improvement in investor and market confidence, which was evident in our Risk Aversion Index (RAI) – the RAI is now at its lowest level since before the C-19 pandemic.”

She pointed out that the data reflects some ongoing hesitation in deployment to private markets, particularly infrastructure. However, she said private markets still represent nearly half of all searches by bfinance’s investor clients, which is a “very strong figure”.

Read the digital edition of IPE’s latest magazine