Instos turn to infrastructure and private assets

Oksana Patron

24 March 2023

The new market regime has seen institutional investors turning to infrastructure and private assets, according to Nuveen’s Equilibrium Global Institutional Investor survey.

When it comes to their portfolio strategies, 59% of investors around the globe were either “actively rethinking” (31%), “redefining and reallocating” (27%) or setting the reset button on their portfolios, with insurance companies being more likely than other institutional investors to be “actively rethinking,” “reallocating” or “setting the reset button”, with 70% doing so.

The survey also found that nearly half (48%) were reformulating how they calculate capital market assumptions, 38% are making significant tactical allocation changes and 27% were making foundational changes to their strategic asset allocation.

The manager said investors were responding to an extraordinarily turbulent investment landscape, marked by surging inflation and extreme market volatility, war, climate disasters, and political and social unease.

They  picked energy supply disruptions, population demographic shifts and deglobalisation as key megatrends that will impact their portfolios over the next five years.

Additionally, in APAC, 84% of investors agreed that the world was changing dramatically and portfolio strategies needed to keep pace and 77% said that the influence of geopolitics, in particular, on investment strategies was more significant today than it has been over the last 30 years.

“Recognising the need to make significant changes given current market environment, 62% of APAC investors are actively rethinking, redefining and reallocating or setting the reset button on their portfolios,” Mike Perry, Head of Nuveen’s Global Client Group, said.

“The current environment has prompted investors to identify and take advantage of opportunities in sectors they may have previously overlooked. They’re also focusing on newer, evolving portfolio goals, such as climate risk and impact.”

The Nuveen’s data showed that compared with recent years, interest in alternatives has surged. In 2020 and 2021, about 25% to 35% of global investors said they planned to increase allocations to the major categories of alternative asset classes.

But in 2022, the numbers grew to the 43% to 58% range. For APAC investors, private equity was still the most commonly picked asset for investors planning to increase their alternative allocation (chosen by 62% of those surveyed), followed by infrastructure (chosen by 61%).

They also considered real estate (54%) and private credit (45%) in the planned increased allocation to alternatives.

Investors indicated that they would use infrastructure for a host of solutions as private infrastructure was the top pick for inflation-risk mitigation and infrastructure debt was one of the top choices for allocations to alternative credit for APAC investors.

In addition, infrastructure was picked most often as the asset class investors are prioritizing for their climate risk strategy.