Stock market investors have seen enough red, thank you
Survey by world’s largest asset manager shows clients fleeing from stocks into real estate and private equity
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. Blackrock is the world’s largest asset manager.
Over half the 230 institutions managing $7-trillion of investable assets surveyed by BlackRock plan to decrease allocation to public equities this year, up from 35% 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 US and Canada, with 68% of investors there planning to reduce allocations, versus 27% in continental Europe, the survey showed. Underpinning this rebalancing is concern that the economic cycle is turning, as cited by 56% of clients.
While strong economic data in the US and a dovish message from US Federal Reserve chair Jerome Powell on Friday have helped to alleviate some worries, the US and Canada-based investors were most concerned about rising US interest rates, BlackRock said. This represented just over half of those surveyed (52%), 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% of those surveyed intend to increase exposure to real assets, 47% planned to boost private equity allocations and 40% chose real estate.
Flows to fixed income are expected to increase to 38%, from 29% a year earlier. Within this asset class, private credit is set to benefit – 56% 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% planned to increase cash holdings while 27% of continental European accounts aimed to decrease cash.