Gatekeepers anticipate defined benefit (DB) plans will increase their proportion of alternative investments (AI) during the next year, according to research from Cerulli Associates.
"The 2008 financial crisis left institutions in search of more consistent portfolio returns across different economic environments," says Michele Giuditta, associate director at Cerulli. "There is new thinking around portfolio construction, leading institutions to re-evaluate their models for governance, asset allocation, and implementation."
In the second quarter issue of The Cerulli Edge – Institutional Edition, Cerulli examines institutional portfolios, taking a close look at asset allocation and risk factors.
"An objective-based approach results in higher allocations to non-correlated assets, such as alternatives and global assets," Giuditta says. "A recent Cerulli survey of investment consultants confirms that US institutional investors across client segments have increased their exposure to alternative assets since 2007.
"We found that gatekeepers anticipate that non-profits will increase their proportion of alternative investments during the next 12 months, specifically allocations to real estate and other real assets.”
Cerulli asserts that as institutional investors increasingly take an objective-based approach to portfolio construction, hedging and risk management allocations will grow in importance within institutions' portfolios.