Australian institutional investors are actively increasing their allocations to alternatives, particularly those that deliver idiosyncratic values and opportunities.
According to the inaugural Nuveen and CoreData survey, more than half (55%) of asset owners will shift away from public to private markets in the next 12 months.
The head of Nuveen's global client group Michael Perry said that in a low-return environment, the shift to private asset classes and other alternatives has accelerated as more investors search for sources of alpha that are "idiosyncratic"— that is, not strongly correlated with other assets.
"Rather than tapping private markets opportunistically and tactically to boost returns, investors are making private investments a more strategic and critical part of their investment approach," he said.
|Sponsored by Eaton Vance|
Eaton Vance: Active vs. Passive in EMD
However, 53% of instos believe it is difficult to find true, idiosyncratic alternatives.
Many are looking for more specialised, off-market alternatives opportunities, while others seek new strategic partnerships for co-investment.
One superannuation fund chief investment officer said: "We like to be a first mover... It works often, but not all the time. Once you get the reputation as someone who's willing to seed new funds and take cornerstone arrangements, then you get known for that, and everyone who wants to launch something new gives you the first chance."
Eighty-six percent of the 700 global instos surveyed invest in alternatives. Some two thirds of these intend to increase their exposure in 2021 and many are doing so on their own accord by buying real estate or securing their own private equity deals.
Participants said that many of their allocation decisions are driven largely by the macroeconomic environment and the effect of the global pandemic.
Monitoring market volatility and interest rate changes are important factors, cited by 42% of investors.