Pension funds and other institutional investors increased their level of investment last year by 20%, research indicates – with a distinct demand for smart beta.
The research was carried out among investment advisory firm Willis Towers Watson’s institutional clients who the firm said were looking for innovative ways to achieve better risk-adjusted returns.
Total investment was $71.1 billion (€66.4 billion) after the increase, with equities as the most popular asset class, rising 25% above 2015. Interest was across global, emerging and smart beta.
Luba Nikulina, global head of manager research at Willis, said “the reality is that most active managers do not add value after fees” so clients were looking at smart beta solutions.
Private equity saw a “resurgence” in 2016 as Willis clients allocated 75% more capital to the asset class than in the previous year. Also, investment in infrastructure and real estate increased by nearly 50%.
An area that institutional investors seemed to be wary of was debt strategies as credit allocations fell. Nikulina said it reflected “the valuation picture in the current state of significant monetary expansion”.
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