Return to main feature article

The results of the CIO Sentiment Survey broken down into investment impact and themes

↓Click to explore

Asset allocation

Alongside investors boosting their allocation to risk assets, the annual CIO Sentiment Survey shows other important shifts in asset allocation trends.

After years of favouring passive over active strategies, especially in developed markets, institutional investors are increasing their allocations to active equity to better tap the alpha opportunities of market turbulence.

Alongside investors boosting their allocation to risk assets, the annual CIO Sentiment Survey shows other important shifts in asset allocation trends.

After years of favouring passive over active strategies, especially in developed markets, institutional investors are increasing their allocations to active equity to better tap the alpha opportunities of market turbulence.

"Investors are moving more assets into active strategies and away from indexing"

For example, 20 per cent of 2021 respondents said they planned to shift more assets to active equity strategies compared to 14 per cent saying the same in 2020. Cue a reduced appetite for index tracking strategies where survey data shows allocations slowed through 2021, with fewer respondents indicating they plan to increase their passive allocations compared to last year.

Other asset allocation strategies remain constant, however. In keeping with previous years’ analysis, allocations to alternatives remain steady through 2021. As volatility and risk continues to stalk public markets, asset owners seek strategies that pay an illiquidity premium from locking up their cash longer term in private equity, private debt or to finance infrastructure

Planned allocation shifts

% of respondents, 2020 vs 2021

key:

2020
2021

Active Vs. passive

Active
ex Alts
Passive

"62 per cent of 2021 respondents say they plan to boost their allocation to private debt compared to 30 per cent in 2020"

Other asset allocation strategies remain constant, however. In keeping with previous years’ analysis, allocations to alternatives remain steady through 2021. As volatility and risk continues to stalk public markets, asset owners seek strategies that pay an illiquidity premium from locking up their cash longer term in private equity, private debt or to finance infrastructure.

Out of the alternatives bucket, appetite for private debt shows the most marked jump in 2021 as investors tap into the returns on offer from supplanting traditional banks and bond markets as corporate lenders. 62 per cent of 2021 respondents say they plan to boost their allocation to private debt compared to 30 per cent in 2020.

Private equity has also swung back into favour after a brief respite with 45 per cent of 2021 respondents saying they plan to shift more of their allocation into private equity compared to 7 per cent saying the same last year.

For small plans, the most sought-after illiquid investment is infrastructure, followed by private debt and then real estate.

In contrast, larger plans favour private equity and private debt the most.

Of course, appetite for alternatives has cost implications, warns Anthony Skriba, senior consultant at Casey Quirk.

“Asset rotation into private market assets continues, although caps on supply mean even more cost increases for asset owners to maintain the desired portfolio,” he says.

Largest Allocation shifts by plan size

Net allocation shifts, 2021

76%
53%
46%
Infastrucure
Pivate Debt
Real Estate
83%
83%
75%
Private Equity
Infastructure
Active High-Yield
Fixed Income

key:

2021