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BlackRock: Investors fleeing fixed-income for RE

Investors are increasingly embracing illiquid assets, including real estate, as a way to meet their long-dated liabilities, according to a poll of over 170 of BlackRock's largest institutional clients.

More capital is heading to alternatives strategies, including real estate, as the world's largest investors reduce their exposure to allocations in equities, according to a survey from the global money manager BlackRock.

The New York-based firm polled over 170 of its largest institutional clients, representing $6.6 trillion in assets under management, about potential changes to their asset allocations in 2016. The results show that 47 percent of investors are increasing their allocations to real estate, while only 9 percent are cutting back on property.

The shift towards illiquid assets is occurring as investors reduce their allocations in equities. Investors based in Europe, the Middle East and Africa (EMEA) are limiting their exposure to cash and fixed income, while increasing their exposure to real estate and other real assets.

A third of respondents globally are planning to decrease their equity allocations. However, the trend is significantly more pronounced in US and Canadian institutions with half of the respondents planning to reduce their equity allocations. For institutions in EMEA, reductions to equity allocations are more muted with a 28 percent decrease.

“Recent market volatility is driving a repricing of assets globally. The ripple effect from recent events is causing investors to actively manage risk and seek alternative sources of returns,” commented Mark McCombe, senior managing director and global head of BlackRock's institutional client business. “Investors are attempting to look past the current market environment and find alpha generating opportunities that match their liabilities.”

The geographic split of the investors polled was: 34 percent located in North America, 34 percent in Europe, the Middle East and Africa, 11 percent in Asia Pacific, and 5 percent in South America.