“Our research confirms that with the dramatic rise in yields, investors are concerned about how to balance risk and return within their portfolios, leading them to look beyond traditional public fixed income investments,” said Gaurav Mallik, chief portfolio strategist for State Street Global Advisors. “Now is the time for institutional investors to be strategic with their allocations, and they are finding increased opportunity to pair private assets with liquid publicly traded exposures.”
Over one-third of respondents say that more than 20% of their fixed income portfolio is allocated to index strategies (57% among larger investors (those with AUM over US$10 billion)).
However, more than three quarters of respondents are not planning to make meaningful changes to their balance of index and active strategies in the next 12 months.
“Institutions are embracing active and index fixed income ETFs at an accelerating pace to optimize their portfolio’s asset allocation and liquidity in this challenging market environment,” said Bill Ahmuty, head of the SPDR fixed income group at State Street Global Advisors. “As the fixed income market has evolved, some of the structural inefficiencies that were historically sources of outperformance have eroded, which has increased demand for index-based investments. However, there are still opportunities for active managers to add value, especially those with deep sector knowledge and credit skills in specific segments of the credit and loan markets.”
Seeking alternatives
Alternative investments are increasingly part of the story as institutional investors seek returns.
