International wholesale investors do not expect to increase their allocation to private markets significantly from current levels, and remain optimistic about public markets despite global economic headwinds, reported RBC BlueBay Asset Management.
The survey of 800 European and US fund buyers, consultants and wealth managers revealed they are currently allocating 22% of their portfolios to private markets, with just over half expecting the public market to outperform private markets over the next five to 10 years.
Market volatility hasn’t changed the case for investing in public markets, argued 46% of intermediary investors, with the remaining respondents split equally between supporters and detractors.
Leading the asset class category, equities and fixed income remain the primary allocation choices for 31% and 26% of wholesale investors respectively, with active management being the most preferred approach.
The survey results indicate an increase in appetite for value stocks. While 28% of wholesale investors are currently allocating to this style, 33% of the respondents are likely to join the club in the next three years.
Large-cap stocks emerged as the preferred mode for allocation over the next three years for 42% of the investors, followed by small and mid-cap and small stocks.
Within fixed income, a third of the respondents – especially UK-based investors – preferred absolute return bond strategies.
While half of the fund buyers agreed that inflation would cause investors to struggle with returns for at least the next three years, most expected portfolio returns to hover in the 5-6% over the next three to five years.
More than half of the investors regard ESG as a key consideration, and an overwhelming majority believe that emerging markets are poised for growth. Additionally, more respondents envisaged China as the most investable emerging market country compared to 2021 findings. Wholesale investors expect North America and China to record the biggest equity rally over the next five years, although there are signs of a shift towards Europe.
Commenting on the research findings, Anthony Pickering, head of business development, RBC BlueBay Asset Management said: “The majority of wholesale investors continue to favour active management, seeking greater flexibility in portfolios as they navigate these uncertain times. The research also suggests the much-anticipated boom in private markets allocations may well play out more slowly than expected, as investors first seek to address portfolio imbalances caused by market re-pricings through allocations towards public markets.”
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