Institutional Investors Eye Higher Allocations to PE, Hedge Funds

Despite some very public griping and high-profile exits from and about hedge funds and private equity, institutional investors are still looking to increase their allocations to both investment vehicles in 2017 and 2018, according to a survey.

The Fidelity Global Institutional Investor Survey polled 933 institutional investors across the globe. In all, 72 percent of them said they’d be increasing their allocations to PE and hedge funds over the next two years.

Their pooled responses also show their confidence in meeting return targets, even if they’re also wary about the market climate.

More details from Reuters:

The survey, which was conducted over the summer, found that despite their concerns, 96 percent of the institutions believed they could achieve an 8 percent investment return on average in coming years.

[…]

institutions were most concerned with a low-return investing environment over the next one to two years, with 28 percent of respondents citing it as such. Market volatility was the second-biggest worry, with 27 percent of respondents citing it as their top concern.

Private sector pensions were most concerned about a low-return environment, with 38 percent of them identifying it as their top worry, while sovereign wealth funds were most nervous about volatility, with 46 percent identifying it as their top concern.

“With the concern about the low-return environment as well as market volatility, as a result we’re seeing more of an interest in alternatives, where there’s a perception of higher return opportunities,” said Derek Young, vice chairman of Fidelity Institutional Asset Management and president of Fidelity Global Asset Allocation.