Super funds drop fixed income

More than 90% of the institutional investors interviewed, nearly half of which were pension funds, said they would decrease their allocation to Australian fixed income, while 57% said they would shift from international fixed income.

Over the next 12 to 18 months, institutional investors said they would increase allocation mainly to infrastructure (88.5%), private equity (82.8%), direct property (74.1%) and other alternative investments (89.2%).

More than 50% said they would also increase allocation to exchange traded funds, international shares and cash, while they would decrease their allocation to Australian equities, listed property and indexed bonds.

Their most highly targeted asset classes included emerging markets - Brazil, India, Russia and China, - infrastructure and distressed debt, while green investments were the least likely they would consider.

In relation to performance, nearly 60% said the uncertainty over the full extent of the credit crunch would have the greatest impact.

Inflation, market volatility and recession were included as factors of concern, while only 2% of the institutional investors surveyed said the rise and politics of sovereign wealth funds would affect their performance.

They said they wanted to find out more about innovations in asset allocation models and strategies.

Less than 20% said they would be interested in learning more about liability driven investment (LDI).

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