Institutional investors in Asia are most likely to ramp up their allocation to alternatives heading into 2020 amid lingering uncertainty over economic and geopolitical risks in Europe and the US.
Nearly half (49%) said they were most inclined to increase their alternatives allocation at Principal Global Investors’ Asia Summit in Singapore last month. The asset manager hosted around 80 Asian institutions, family offices and private banks and asked for their views on asset allocation.
Some 42% of those surveyed said they anticipate a significant deterioration in on or more European economy, while 24% indicated a “shock outcome” in the US presidential election which takes place in November 2020.
In stark contrast, just 18% of respondents forecast a significant deterioration in one or more Asian economy.
Aside from alternatives, 29% plan to boost the multi-asset aspect of their portfolio. Just 9% are likely to increase their fixed income weighting, and this figure drops to 6% for equities.
“With Asian investors seemingly looking closely at opportunities in alternatives, we believe that real estate across public equity (US Reits), public debt, private debt, and private equity should be a key constituent of investors’ portfolios,” said Seema Shah, chief strategist at Principal Global Investors.
“As a long-term asset class with different drivers and dynamics to global stock markets, real estate (especially private real estate) is somewhat sheltered from downside risk and sudden market selloffs,” added Shah.
“As domestic assets, they tend to be somewhat insulated from global supply chains and geopolitical concerns.”
Principal Global Investors says it manages approximately $459 billion in assets.
©2019 funds global asia