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U.S. asset managers favor emerging market equities

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Over the next 24 months, one-third of U.S. asset managers will enhance product development initiatives focused on emerging market equities, according to new research.

Cerulli Associates, Boston, published this finding in its May issue of “The Cerulli Edge—Global Edition.”  The monthly publication explores worldwide asset management trends and strategies.

When asked to select the two top equity, fixed income and alternative strategies that their product development initiatives will emphasize in the next 24 months, 33.3 percent of the responding asset managers selected emerging market equities. This was followed by credit long/short vehicles (30.8 percent), emerging market debt (29.4 percent), global equities (27.8 percent), high-yield (23.5 percent) and real estate assets (23.1 percent).

Turning to investment strategies that will receive the most fresh business from European institutional investors ‘hunting for yield’ in the next 12-24 months, just over one-quarter (27 percent) of investors selected multi-asset/diversified growth strategies. Fewer asset managers identified the following:

Loans/high-yield credit (20 percent)

Emerging market debt (20 percent)

Global equities (13 percent)

Global bonds (7 percent)

Equity income (7 percent)

Real estate/infrastructure (7 percent).

“Illiquid assets might be the next step in the hunt for yield,” the report states. “Several groups, including Allianz, are looking at launching pooled infrastructure debt funds this year.

“Liquidity and construction risk are a concern, but with spreads on infrastructure debt of between 3 and 3.5 percent over government debt, the investment case remains attractive.”

When questioned how the proportion of institutional business they manage through segregated accounts has changed during the past five year years, the asset managers answered as follows:

Stayed the same (54 percent)

Decreased by 0 to 25 percent (23 percent)

Increased by 0 to 25 percent (8 percent)

Increased by 25 to 50 percent (8 percent)

Decreased by 25 to 50 percent (8 percent)