Stock Market Fears Push Investors Toward Alternative Assets

Twenty-six percent of investors plan to commit more to private capital this year, according to Preqin.

Michael Nagle/Bloomberg

Michael Nagle/Bloomberg

Institutional investors are planning to increase their exposures to private capital amid concern that the equity market has peaked, according to a Preqin survey.

“Concerns about the future trajectory of equity markets have moved to the forefront of investors’ thoughts in the past 18 months,” Amy Bensted, Preqin’s head of data products, said in a statement Wednesday. “This is throwing the role of alternative assets into sharper focus.”

Twenty-six percent of investors said they planned to commit more to private capital this year as a result of their market outlook, while 64 percent weren’t planning any changes to their allocation to the asset class, according to Preqin.

Investor appetite for alternative strategies has not declined amid anticipation of “more difficult times” partly because investors view such assets as non-correlated and a way to diversify their portfolios, according to Bensted. Investments that don’t move in lock-step with the stock market are “key tools for capital protection in the face of a downturn,” she said.

About 61 percent of institutional investors surveyed by Preqin said they believe the stock market is at a peak, raising concerns that a market correction will arrive in the near future.

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The roles that alternative assets play in portfolios “are becoming more pivotal in the face of a potential downturn,” Preqin said. According to the survey, 82 percent of investors have exposure to at least one alternative asset class, with the majority allocating to private equity, real estate, and hedge funds.

Seventy-nine percent of hedge fund investors planned to maintain or increase their allocations this year, the highest portion since 2014, according to the alternative assets data provider.

“Over longer term, the net majority of investors across all asset classes intend to increase their allocations to alternative assets,” Preqin said.