20/05/2015
Institutionals using more alternative and passive management
In an environment of low interest rates, institutional investors tend to revise their general approach and to take an interest in asset classes which are less familiar to them, and to less constrained strategies, according to a 2015 survey carried out by Mercer, covering about 1,100 institutional portfolios in 14 European countries, representing more than EUR950bn in assets («European Asset Alloocation Survey»).The average allocation to alternative management has increased in one year by 2 percentage points, from 12% to 14% of total assets. In the United Kingdom, the evolution is even more pronounced, with a reduction of 6 percentage points in allocation of assets to equities in the past two years, largely to the benefit of alternative allocations.Another significant development is increasing use of passive strategies for traditional core portfolio equity and bond asstes. In terms of equities, the average allocation invested passively totals 49%, compared with 45% in 2014. For bonds, the percentage of passive allocation has risen from 37% to 44%.The survey also finds that environmental, social and governance (ESG) criteria are taken into account to a larger extent. Only 35% of institutionals surveyed say they do not take these factors into account, compared with nearly half (48%) in 2014. Among the factors which contributed to this evolution, potential financial impact and management of reputation risks.
