US institutional markets grew 10.7% to USD18.7 trillion in 2013, according to new research from Cerulli Associates.
"The growth we saw in 2013 was fuelled by robust equity market returns," states Susana Schroeder, senior analyst at Cerulli. "The growth or decline of US institutional markets depends primarily on investment returns, followed by net flows."
"After a strong year in equities in 2013, some asset managers began 2014 by taking risk off the table and rebalancing out of equities and into fixed income. Others are seeking lower-cost products," Schroeder explains. "As of the end of 2Q 2014, global unconstrained fixed income is leading year-to-date net flows while two passive universes – global passive equity and EAFE passive equity – make an appearance on the top-10 list. US passive S&P 500 equity is leading in total institutional assets as of 2Q 2014, while U.S. large cap value equity and US core plus fixed income round out the second and third spots.
Cerulli's latest report, Institutional Markets 2014: Opportunities in a Crowded Market, evaluates U.S. institutional markets, including distribution and product trends within public and private pensions, endowments and foundations, and insurance general accounts. Topics include market sizing, segmentation, and asset projections for the central institutional channels.
"Although interest rates have maintained low levels year-to-date, placing pressure on funding levels and raising the value of pension obligations, consultants and asset managers that we have spoken with agree that the demand for pension de-risking services is still relatively high and expected to grow," Schroeder continues. "Pensions are looking to preserve funding levels after 2013, and consultants are advising them to start on the de-risking path now in order to lock in low interest rates-if not for all assets, then for at least a portion of them."
"Opportunities exist for asset managers with strong fixed-income departments as pensions move forward on the liability-driven investing glidepath," Schroeder adds.