How have allocations changed among the biggest asset owners?
Around the world, asset owners are finding alternatives increasingly attractive, with one exception: North America, where fixed income is increasingly the flavour of the month (Michael Nagle/Bloomberg)
Good morning and a happy new year. Hopefully Father Christmas brought you everything you asked for.
To look forward to the coming 12 months, I had a chat with Jessica Gao, who recently completed WTW’s latest Asset Owner 100 - the list of the top 100 global asset owners.
Each year WTW also breaks out the average asset allocation for the biggest owners on the planet and because I love a chart, I thought I would start by comparing how this has changed since 2022 (when WTW first published this data).
Overall the numbers confirm one of the big trends of the past few years: average allocations to alternatives have gone up - though only by 2 per cent overall.
This trend has played out in most regions over the past two years with one exception: in North America allocations to equities and alternatives have gone down while average exposure to fixed income has gone up (in effect allocations to alternatives are flat, since the fall is only 0.2 per cent).
As our sister title MandateWire covered recently, appetite for fixed income is strong in the US because of the perceived need to de-risk.
Consultancy RVK, which has recommended that some of its clients shift towards fixed income, said: "Current capital market expectations, including a diminishing expected equity risk premium and elevated public equity valuations, have increased the relative attractiveness of fixed income."
Gao said the shift towards private assets is one of the key trends among the largest asset owners - though not all of them are making this move.
She said: “The Canadian and Gulf funds are very much at the front tier of investing in private assets.”
Gao said there were significant differences across the Asset Owner 100 in how these assets are managed.
She said: “If you look at the Maple 8, which is very well established, they tend to be a large team and a lot of things are managed internally but on the other hand you have the US and Australia [where] there are different levels of insourcing and outsourcing.”
Looking forward, Gao said: “We have benefitted from decades of good market returns, relatively stable policy environment but we are surely entering a stage when a lot of things are becoming more uncertain and more fragile. The feedback loop is faster and stronger
“A question all these asset owners face is how to build a more resilient portfolio.”
This, she said, is ultimately why so many of them are looking to diversify and invest in private assets.
But ultimately there is more than one way to skin a cat.
