Nonprofits and pensions managing $1 billion or more in assets hold a substantial portion of their assets in equities, according to Market Strategies International. MSI released findings in June that highlighted some of the key concerns of institutional investors.
Pensions and nonprofits share an interest in equities, particularly actively and passively managed U.S. public and actively managed international equities.
While pensions hold 38% of their assets in those asset classes, another 35% is held in U.S. fixed income. By comparison, nonprofits allocate just 18% of their assets to fixed income, preferring real assets, commodities and alts like hedge funds and real estate (26%).
MSI found that over the next three years, though, $1 billion-plus pensions will likely shift out of actively managed U.S. equity in favor of alternatives and actively managed fixed income. The report noted that is part of an established trend.
Nonprofits, on the other hand, will likely increase their allocation to active U.S. equity, although MSI found the biggest change in actively managed international equity, a class to which 49% of nonprofits say they expect to increase their allocation.
MSI noted that derisking remains pensions’ main priority; in fact, respondents reported it has become more important over the past couple of years, “perhaps a reflection of their desire to maintain the improvement in funding status they have recently achieved,” according to the report.
Nonprofits are motivated by higher yield and diversification, MSI found. “In addition, capturing tactical opportunities also emerges as a consideration factor, likely a reflection of the ability of these investors to take a slightly more opportunistic and shorter-term view.”