Institutional investors are increasingly considering moves into alternative asset classes owing to expectations of rising volatility in equities markets this year, according to research from Carne Group.
The firm found two out of three institutional investors (67%) believe the level of volatility in markets will rise this year, with 6% predicting a dramatic increase.
Carne Group commissioned Pureprofile to interview 201 investors working for pension funds, family offices, wealth managers, insurance asset managers and consultants across the UK and continental Europe. Those taking part had a total of $1.7trn under management and were spoken to in December 2023 or January 2024.
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The researchers also found that close to nine in 10 investors (88%) said they believe their organisation’s appetite for risk will be higher this year, with 11% saying it will be much higher.
Among pension funds alone, 92% expect risk appetite to be higher, with 6% expecting it to be much higher, while for family offices the corresponding figures are 83% and 20% respectively.
Around 86% of insurance asset managers expect an increased risk appetite with 6% said it will be much higher. For wealth managers the figures were 85% and 14% respectively and for consultants they were 96% and 13%.
In terms of which alternative asset classes are most appealing, around 65% of those interviewed chose hedge funds as among the top three private asset classes for growth in inflows, while 57% selected venture capital and 56% said private equity.
The full findings:
| Asset class | Number of institutional investors forecasting the asset class will be among the top three for attracting institutional inflows over the next five years |
| Hedge funds | 65% |
| Venture capital | 57% |
| Private equity | 56% |
| Renewable energy | 55% |
| Private debt | 30% |
| Real estate | 30% |
John Donohoe, CEO at Carne Group, said: “Sustained stockmarket volatility and investors seeking higher returns has driven increased interest in alternative asset classes which generally show lower levels of correlation to short term price movements, which is important not only for diversification but also for regulatory purposes.
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“The growing focus on alternatives is not a short-term move either, with institutional investors predicting strong but selective growth in inflows to alternatives over the next five years. One area we are seeing a particular increase in inflows is private debt, and our research suggests this is likely to continue.”
