LONDON: Global investors are shoring up portfolios against economic downturn, with plans to cut allocation to publicly listed equities in 2019 in favour of assets such as private equity and real estate, according to the results of a BlackRock survey.
Over half the 230 institutions managing $7 trillion of inevitable assets surveyed by BlackRock plan to decrease allocation to public equities this year, up from 35 percent in 2018, the survey, released on Monday, showed.
Global stocks suffered their worst year in over a decade in 2018, with trepidation surrounding economic slowdown, trade tension and rising interest rates infecting the market in the second half of the year. Markets have been similarly volatile at the start of 2019.
Equities appear to be especially in disfavour in the United States and Canada, with 68 percent of investors there planning to reduce allocations, versus 27 percent in continental Europe, the survey showed.
Underpinning this rebalancing is concern that the economic cycle is turning, as cited by 56 percent of clients.
While strong economic data in the United States and a dovish message from U.S. Federal Reserve chair Jerome Powell on Friday have helped to alleviate some worries, the U.S. and Canada-based investors were most concerned about rising U.S. interest rates, BlackRock said.
This represented just over half of those surveyed (52 percent), while geopolitical instability and trade tensions were citied as bigger concerns by European and Asian accounts.
BlackRock said private assets and fixed income are likely to be the main beneficiaries of the shift in sentiment in 2019, as investors search for uncorrelated sources of returns.
As such, 54 percent of those surveyed intend to increase exposure to real assets, 47 percent planned to boost private equity allocations and 40 percent chose real estate.
Flows to fixed income are expected to increase to 38 percent, from 29 percent a year earlier. Within this asset class, private credit is set to benefit — 56 percent of those surveyed globally planned to increase allocations to the sector.
Cash too will be a key part of portfolios though BlackRock highlighted regional differences. Of Asia-Pacific accounts, 33 percent planned to increase cash holdings while 27 percent of continental European accounts aimed to decrease cash.