Instos targeting global and passive investments
Institutional investors continued the trend of investing away from local markets in 2011 as they sought to diversify their portfolios, according to Towers Watson.
The clients of Towers Watson made 800 manager selection decisions in 2011, which reflected around US$80 billion of assets moved - up 40 per cent from 2010.
Bond mandate selections accounted for US$21 billion, with the allocation to US bonds almost doubling from 2010. Equities mandates accounted for US$24 billion in 2011, with global equities accounting for a third of all equity mandate selections.
Towers Watson global head of investment research Craig Baker said the move to global equities was part of a move by institutions to diversify their portfolios.
There was also an increase in passive investments in 2011, with the Towers Watson clients investing over US$16 billion in the asset class - up 60 per cent from 2010.
"Indexation and smart beta are playing increasingly important roles in investors' portfolios, as many new innovations provide efficient access to markets at lower cost," said Baker.
Passive investors can now choose from among a range of options - including insurance and emerging market currency - with the expectation of better risk-adjusted returns, he said.
When it comes to alternative investments, institutions are choosing to go direct rather than through fund of funds due to a focus on "better fee structure and greater transparency", said Baker.
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