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Top 10 Products Among Institutional Investors

Top 10 Products Among Institutional Investors Top 10 Products Among Institutional Investors

Institutional investors' philosophies are changing with the times. The products they're asking for are becoming more and more in-line with larger social and macro-economic trends, according to a report from Boston-based consulting firm Cerulli Associates and the Institutional Investor Institute. Given the heightened global turmoil and volatility, for example, many have moved farther away from traditional assets and are now asking for exposure to emerging markets and different kinds of fixed-income. They're also showing more interest in investing in socially responsible and environmental and social governance, Cerulli reported. Moreover, the changing dynamics of retirement planning have also affected how some pension funds are invested. Click through for the full list of the top 10 products institutional investors have requested of advisors and asset managers in the past twelve months.

Credit: U.S. Institutional Markets 2012, Cerulli Associates

10. PRIVATE EQUITY MANDATES 10. PRIVATE EQUITY MANDATES

12% of managers received Several Requests
88% received No Requests

Since the financial crisis of 2008, the amount of dry powder has been high, with private equity firms sitting on more than $1 trillion
in dry powder at the end of 2011. When they decide to allocate to private equity, 43% of institutions hire an external consultant to
assist in their alternatives due diligence process. -Cerulli

9. REAL ASSETS (E.G., TIMBER) MANDATES 9. REAL ASSETS (E.G., TIMBER) MANDATES

17% of managers received Several Requests
28% Received One or Two Requests

8. REAL ESTATE MANDATES 8. REAL ESTATE MANDATES

19% of managers received Several Requests
6% Received One or Two

7. TAIL-RISK HEDGING MANDATES 7. TAIL-RISK HEDGING MANDATES

26% of managers received Several Requests
21% Received One or Two Requests

With interest rates and default rates at historical lows, investors are in search of yield and adding to their high-yield allocations.
Meanwhile, as corporate pension plans continue to derisk, there is a need for more long-duration products to better manage
their risk profile and match the duration of their assets and liabilities. -Cerulli

6. RESTRICTIONS AGAINST HOLDING CERTAIN SECURITIES 6. RESTRICTIONS AGAINST HOLDING CERTAIN SECURITIES

30% of managers received Several Requests
20% Received One or Two Requests

“We have found that many large public pension funds are adopting processes for integration of ESG investments into their
portfolio,” Michele Giuditta, associate director at Cerulli, explained. “As institutional markets become increasingly competitive, asset managers are finding ways to diversify
their offerings and socially responsible investing is one form of diversification we are seeing.”

5. HEDGE FUND MANDATES 5. HEDGE FUND MANDATES

32% of managers received Several Requests
22% reported One or Two Requests

"Hedge funds and other alternative assets are also anticipated to continue to attract more assets over the next few years, as institutional investors look for non-correlated assets and greater diversification," Cerulli said. "While recent hedge fund flows have decreased, institutional investors’ long-term allocations are expected to increase."

4. MULTI-ASSET CLASS PRODUCTS 4. MULTI-ASSET CLASS PRODUCTS

40% of managers received Several Requests
20% Received One or Two Requests

3. SOCIALLY RESPONSIBLE/GREEN/SUSTAINABLE MANDATES 3. SOCIALLY RESPONSIBLE/GREEN/SUSTAINABLE MANDATES

45% of managers received Several Requests
30% Received One or Two Requests

"Interest in socially responsible and environmental, social and governance (ESG) investing has increased in recent years from more than just non-profits. Many large public pension funds are adopting processes for integration of ESG investments into their portfolios," Cerulli said.

2. LONG DURATION FIXED-INCOME MANDATES 2. LONG DURATION FIXED-INCOME MANDATES

47% of managers received Several Requests
24% received One or two requests

With interest rates at historical lows, investors are in search of yield and adding to their high-yield allocations. Meanwhile, as corporate pension plans continue to derisk, there is a need for more long-duration products to better manage the risk profile and match the duration of their assets and liabilities. - Cerulli

1. EMERGING MARKETS MANDATES 1. EMERGING MARKETS MANDATES

55% of managers received Several Requests
20% received One or two requests

Over the last year, there have been several requests (reported by 55% of managers surveyed) from clients to run emerging market (both fixed income and equity) mandates. With interest rates at historical lows, investors are in search of yield and adding to their high-yield allocations. -Cerulli

Institutional investors' investment philosophy is changing with the times. The products they're asking for are becoming more and more in-line with larger social and macro-economic trends, according to a report from Boston-based consulting firm Cerulli Associates and the Institutional Investor Institute.

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