Latest research from BlackRock shows global institutional investors are turning to private markets.
The research - which represents more than USD$7 trillion in investable assets - shows more than half of the 230 institutional clients surveyed intend to reduce their allocation to public equities in the coming year. In terms of client numbers, it's an increase of 16 percentage points year-on-year.
BlackRock global head of institutional client business Edwin Conway said the firm believes private markets can help clients navigate a more challenging environment as the economic cycle turns.
"We have been emphasising the potential of alternatives to boost returns and improve diversification for some time, so we're not surprised to see clients increasing allocations to illiquid assets, including private credit," he said.
BlackRock's survey shows real assets are also set for a spike from institutional investors in 2019, with 54% of respondents indicating they anticipate increasing their allocations to the asset class ion the coming year.
Despite forecasting reductions in equity exposures, the research also hinted at institutions shifting the focus of the strategies within their equities portfolios, with a third of institutions looking to increase allocations to alpha-seeking strategies. More than a quarter of institutions will focus more on ESG strategies and impact investing. Reducing home market bias and increasing diversification was a top three consideration for institutions in the Asia Pacific region.
Conway said it was important BlackRock's clients continued to stay invested, and noted alpha-seeking strategies made "particular sense" in the current climate.
"We're seeing clients becoming more purposeful about their alpha exposures going forward," he said.