2018 Global Institutional Rebalancing Survey

Jan 8, 2018
By BlackRock

Institutional trends in asset allocation

224 institutional clients, representing over $7 trillion in investible assets, participated in our annual institutional client rebalancing survey which explores planned asset shifts for 2018. Clients were surveyed over a three-week period starting 26 October 2017 to explore how they plan to rebalance assets in 2018.

Portfolio allocation chart

Source: BlackRock; all data as of December 2017
Global view: Base sizes for answers vary: Total (224); Equities (213); Fixed Income (220); Hedge Funds (136); Private equity (177); Real Estate (195); Real Assets (173); Cash (216)
US/Canada view: Base sizes for answers vary: Total US and Canada (81); Equities (79); Fixed Income (81); Hedge Funds (61); Private Equity (72); Real Estate (70); Real Assets (65); Cash (77)
EMEA view: Base sizes for answers vary: Total EMEA (98); Equities (94); Fixed Income (97); Hedge Funds (47); Private Equity (69); Real Estate (89); Real Assets (77); Cash (95)
Continental Europe view: Base sizes for answers vary: Total Continental Europe (77); Equities (76); Fixed Income (77); Hedge Funds (39); Private Equity (58); Real Estate (75); Real Assets (65); Cash (75)
Global insurance view: Base sizes for answers vary: Total Insurance (70); Equities (63); Fixed Income (69); Hedge Funds (39); Private equity (55); Real Estate (59); Real Assets (50); Cash (69)
Global corporate pension view: Base sizes vary by answer: Total Corporate Pensions (75); Equities (73); Fixed Income (74); Hedge Funds (46); Private equity (55); Real Estate (65); Real Assets (56); Cash (71)
As of 2017. For illustrative purposes only. The figures/net change represented in percentages is illustrative in nature and do not express a forecast. 

Illiquid asset classes continue to attract clients seeking additional sources of return, income and diversification; institutions intend to increase allocations to real assets (+60%), private equity (+43%) and real estate (+41%), and with minor decreases (-3%, -10% and -10%, respectively) to these asset classes.

Overall allocations to equities appear to be decreasing, however this varies by region and client type. On an overall net basis, US/Canada (-37%*) intends to reduce their equity allocations, largely driven by corporate pension plans, while Latin America (+42%*) expect to increase their equity allocations. Across EMEA, 5% (net) of investors intend to decrease their equity holdings.

* Percentages represent a net percentage intending to increase or decrease allocations to each asset class. (Calculation: % of firms intending to increase - % of firms intending to decrease)

Fixed income chart

Source: BlackRock; all data as of December 2017
Global view for fixed income: Base sizes for answers vary: Total (224); Core/Core plus (199); Emerging Markets (183); High Yield (176); Long Duration (193); Securitized Assets (161); Short Duration (183); Unconstrained (120); US Bank Loans (127); Private Credit (156)
US/Canada view for fixed income: Base sizes for answers vary: TTotal US and Canada (81); Core/Core Plus (69); Emerging Market (63); High Yield (70); Long Duration (70); Securitized Assets (62); Short Duration (63); Unconstrained (51); US Bank Loans (60); Private Credit (65)
EMEA view for fixed income: Base sizes for answers vary: Total EMEA (98); Core/Core Plus (91); Emerging Market (79); High Yield (72); Long Duration (88); Securitized Assets (64); Short Duration (83); Unconstrained (48); US Bank Loans (43); Private Credit (60)
Continental Europe fixed income view: Base sizes for answers vary: Total Continental Europe (77); Core/Core Plus (76); Emerging Market (63); High Yield (57); Long Duration (70); Securitized Assets (50); Short Duration (60); Unconstrained (38); US Bank Loans (34); Private Credit (47)
Global insurance fixed income view: Base sizes for answers vary: Total Global Insurance (70); Core/Core plus (65); Emerging Markets (57); High Yield (57); Long Duration (59); Securitized Assets (60); Short Duration (61); Unconstrained (38); US Bank Loans (42), Private Credit (50)
Global corporate pension fixed income view: Base sizes vary by answer: Total Corporate Pensions (75); Core/Core plus (60); Emerging Markets (55); High Yield (53); Long Duration (71); Securitized Assets (46); Short Duration (55); Unconstrained (34); US Bank Loans (37), Private Credit (46)
As of 2017. For illustrative purposes only. The figures/net change represented in percentages is illustrative in nature and do not express a forecast. 

Within fixed income, clients continue to shift towards higher-yielding credit sectors and away from core / core plus; 58% of clients surveyed plan to increase allocations to private credit while 28% intend to reduce allocations to core/core plus.

Important notes about the survey:
We asked clients where they are likely to increase and decrease their allocations, but not how they would reallocate from one asset class to another.
Specifically, we asked 224 Institutional clients how likely they are to increase (significantly or slightly), decrease (significantly or slightly), or leave their holdings unchanged in 2018 across seven different asset classes and nine areas within their fixed income portfolios.
If a client didn’t have exposure to a particular holding, they were excluded from the question.
For some regions and specific client groups, we did not achieve enough responses to show the data on its own as the sample size is too small and not statistically reliable. The results, however, have been included in the global summary.
Survey results for 2017 vs. 2018 can be provided upon request.
Clients were surveyed over a three-week period from 26 October.