Institutional investors moving away from equities amid stock market turmoil, BlackRock survey finds

  • Some Asian clients are shifting to commodities, property and private equity
  • Shanghai Composite Index was worst-performing benchmark in 2018
PUBLISHED : Monday, 07 January, 2019, 5:05pm
UPDATED : Monday, 07 January, 2019, 5:05pm

About half of BlackRock’s institutional customers are planning to reduce their exposure to the stock market in 2019, after global equities lost ground in 2018 and are expected to hit another rough year, according to the asset manager’s annual survey of its largest clients.

Major indices in the United States ended 2018 down, but not as broadly as Asian markets, where an escalating trade war between the US and China and a slowdown in the Chinese economy weighed on sentiment.

The Shanghai Composite Index fell 25 per cent in 2018, making it one of the worst-performing benchmarks worldwide. The Hang Seng Index in Hong Kong declined 14 per cent last year, its worst performance in seven years.

China’s stock market ends 2018 as the world’s biggest loser, again

The move away from equities is most pronounced in the United States, where 68 per cent of clients said they planned to reduce their equity allocations, according to BlackRock, the world’s biggest asset manager.

In the Asia-Pacific region, 40 per cent of institutional customers said they planned to cut their exposure to the stock market, while 27 per cent of European clients said they planned to reduce their equity risk.

About 65 per cent of Asian clients said they intended to increase their exposure to real assets, such as commodities and precious metals. About 44 per cent planned to shift holdings to real estate and 40 per cent to private equity, BlackRock said.

“As the economic cycle turns, we believe that private markets can help clients navigate this more challenging environment,” Edwin Conway, global head of BlackRock’s Institutional Client Business, said.

In a world of increased market volatility and great levels of uncertainty, clients are reimagining what they do with their risk assets
Edwin Conway, BlackRock

“We have been emphasising the potential of alternatives to boost returns and improve diversification for some time, so we’re not surprised to see clients increasing allocations to illiquid assets, including private credit.”

BlackRock surveyed 230 of its biggest institutional clients responsible for US$7 trillion in assets during a four-week period in November and in early December.

Clients also said they intended to hold more of their fixed income assets in 2019, with 38 per cent responding they would increase their allocations this year. That compared with 28 per cent of clients who said they would increase their fixed income holdings in 2018, BlackRock said.

About a third of Asia-Pacific clients plan to hold more cash this year, according to BlackRock.

“In a world of increased market volatility and great levels of uncertainty, clients are reimagining what they do with their risk assets,” Conway said.

“It’s important for clients to stay invested, with equities continuing to have a very significant role in portfolios and alpha seeking-strategies making particular sense in the current climate. We’re seeing clients becoming more purposeful about their alpha exposures going forward.”