Two thirds of US and Canada investors set to cut back on equities in 2019

Globally, more than half (51 percent) of the 230 institutional clients representing more than $7 tn in investable assets surveyed in BlackRock’s latest research say they expect to reduce exposure to equities over the course of 2019.

This is a big hike from last year when the number was 35 percent; in 2017 it was 29 percent. The survey comes as last year saw global stocks suffer their worst year in more than a decade. 

This year, however, there are big regional differences, according to the investment manager. ‘This trend is most pronounced in the US and Canada where 68 percent of clients plan to reduce equity allocations, versus just 27 percent in continental Europe,’ states the 2019 Global Institutional Rebalancing report. 

When the survey was conducted in late November and early December 2018, most respondents said the possibility of the cycle turning was their first (37 percent) or second (19 percent) most important macro issue.

But the macro and market influences affecting decisions around asset allocations also highlight regional differences, notes BlackRock. For example, more than half (52 percent) of clients in the US and Canada say they are concerned about rising US interest rates, while 46 percent of EMEA institutions and 40 percent of those in Asia-Pacific cite geopolitical instability/trade tensions as one of the top two macro risks – compared with only 20 percent among BlackRock’s US and Canada clients. 

BlackRock adds that while the overall trend is to reduce exposure to equities, within portfolios, institutions are also shifting their focus and priorities. 

‘Respondents are most focused on reducing public market risk within the equity portfolio (41 percent cite this as one of their top two priorities),’ notes BlackRock. ‘But around one third plan to increase allocations to alpha-seeking strategies, [while] an increasing emphasis on ESG and impact investing is cited by 27 percent of respondents, largely driven by EMEA clients.’

Of those planning to reduce exposure to equities and move more into alternatives, real assets, private equity and real estate prove most appealing among respondents.