44% of US institutional investors indicate desire to increase allocations to alternatives

Written by Adam Cadle

08/12/2022

Forty-four per cent of US institutional investors have indicated a desire to increase their allocations to alternative investments, according to Cerulli.

In its latest report, North America Institutional Markets 2022: Shifting Allocations Amid Market Uncertainty, Cerulli said 28% of US institutional investors plan to allocate to infrastructure and 26% to real estate. Asset owners also indicated an increase to private equity (20%), private debt (20%), and hedge funds (18%) to bolster returns.

In addition to shifting allocations, the research also revealed that 35% of institutional investors plan to increase their use of an investment consultant in the next 24 months. When hiring an asset manager for alternative asset class mandates, specialisation in a specific asset class (96%), strong performance (94%), and competitive fees (92%) are important factors, according to the research.

Looking forward, Cerulli said it believes that asset managers are likely to see increased pressure on fees. Almost all institutional asset owners (94%) negotiate management fees and a majority are doing so on a mandate-by-mandate basis during the sales process.

“It is clear that most institutional asset owners are looking for discounts on management fees below the stated fee schedule. Lower market returns will likely increase pressure on management fees, and asset managers that can keep fees competitive and meet investors’ needs for performance and specialisation will win out,” Cerulli senior analyst Chris Swansey stated.

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