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DB Investment Managers Shifting Asset Allocations

Strong majorities of defined benefit investment managers plan to allocate assets to passive funds, global equity funds, real estate, infrastructure and low-variance equities in the next three years. A report by CREATE-Research and Principal Global Investors says that this is part of a shift by those investors away from equities and emerging market bonds.

And it’s a marked trend since 2013. According to Pensions & Investments (free subscription required), in just two years DB investment managers’ interest in these allocations rose as follows:

  • passive funds: 53% to 70%;
  • global equity funds: 56% to 69%;
  • real estate: 55% to 68%;
  • infrastructure: 45% to 65%; and
  • low-variance equities: 52% to 62%.
The report also shows that just over 50% of them also are interested in allocating assets to alternative credit.

These changes come at the expense of allocation assets in a variety of emerging market funds, as follows:

  • market equities: 45% from 52%;
  • hard currency bonds: 38% from 46%;
  • government bonds: 33% from 46%; and
  • local currency bonds: 18% from 25%.
The report attributed the shifts to uneven global growth, rising global debt and the possibility of higher interest rates.