A rebound on the global stock markets has failed to entice institutional investors back to equities, with managers favouring private markets and defensive assets.
The latest bfinance Quarterly Manager Intelligence and Market Trends shows private markets accounted for 49 per cent of new manager searches in the 12 months to June 2025.
Private debt remained the largest segment at 43 per cent of private market searches, driven by allocations to direct lending, asset-backed finance, and capital preservation strategies.
Infrastructure searches surged from 8 per cent to 17 per cent year-on-year as institutions sought long-duration, inflation-linked returns.
Over the same period, equity managers dipped slightly to 27 per cent of total mandates, with global equity strategies accounting for 46 per cent of this activity.
This is despite gains on global shares in Q2 following sharp falls at the start of the quarter when President Trump unveiled new “Liberation Day” trade tariffs.
Equity markets subsequently recovered amid the temporary suspension of most tariffs while trade talks took place, with a deadline of 9 July for most countries.
Oliver Wade, Content Lead at bfinance, says: “Although headline risk appetite appears stable, investor behaviour tells a more cautious story. Institutional portfolios are increasingly tilting toward liquidity, quality and diversification. The continued strength of private markets, particularly in infrastructure and private debt, reflects a deliberate effort to hardwire resilience into portfolios. Demand is more targeted and risk-aware, with investors positioning for a world that may be more inflation-prone, less dollar-centric, and less reliant on US market leadership.”
However emerging markets equity reached 36 per cent of equity mandates, the highest share in recent years, signalling a clear move toward geographic diversification and focus on markets such as India, Saudi Arabia, and GCC-focused strategies.
Wade says: “This shows improved sentiment following tariff repricing and a recalibration of valuations, particularly in non-US markets.”
Meanwhile the indices paint a picture of international equities outperforming their US counterparts.
The Morningstar Global Markets ex-US Index has more than doubled the return of the Morningstar US Market Index since the start of the year in dollar terms.
Dan Lefkovitz strategist at Morningstar Indexes, says: “In contrast to the US, international equities carried low valuations coming into 2025. They have underpromised and overdelivered. Meanwhile, the US is giving many investors pause, with its narrow and pricey market, mounting debt load, and policy uncertainty.”
Looking to single country indices, Lefkovitz says he sees “lots of eye-popping gains”. Both Mexico and Brazil are up around 30 per cent, while Japan has had what he calls “a solid year”, and Morningstar Korea Index has advanced 43 per cent.
