European institutional investors are putting more money into “alternative” investments such as private debt, as low yields force them to look at riskier assets to boost returns, according to a survey on Monday by consultants Mercer.
The poll of nearly 1,100 investors across 14 countries showed an increase in allocation to alternatives of 2 percentage points from a year earlier, to 14 percent of assets. The investors surveyed had more than 950 billion euros (1 trillion pounds) in assets under management.
“The combination of low and even negative yields across a number of euro zone bond markets, modest risk premia, and rising volatility creates a challenging environment for return generation,” said Phil Edwards, European Director of Strategic Research in Mercer’s investments business, in a statement.
Separately, a survey by executive search group Armstrong International of 305 North American institutional investors showed 78 percent of respondents were investing or planning to increase their allocations to European alternative assets.
“We’ve never detected this level of positive sentiment (towards Europe) on the part of North American institutional investors,” said Martin Armstrong, Chairman of Armstrong International, in a statement.
“It feels very much like a land grab.”
Europe’s pensions and insurance regulator EIOPA carried out its first stress tests on insurers last year and plans similar tests for pension funds this year, amid concern that institutional investors are becoming more exposed to illiquid assets such as infrastructure.