The International Monetary Fund’s (IMF) latest Global Financial Stability Report has a chapter on global trends in asset allocation. It contains the results of a recent IMF survey on global asset allocation of 122 of the largest asset management companies and pension funds with a total of around $20 trillion (Rs956 trillion today) of assets under management. It took a look at how the financial crisis has affected asset allocation.
The survey found that the share of equities in their portfolios declined markedly between end-2006 and end-2010, while the share of fixed income rose. Allocations to emerging markets also increased, but most fund managers said they were more concerned about lowering risk rather than increasing returns.
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The report says that there are “significant downward shifts in investment flows for the full period after the start of the crisis in mid-2007, reflecting an adjustment of portfolio flows to the new assessment of risks... This may be evidence that the risk aversion of institutional investors has fundamentally changed”. But although there is no evidence yet that investors have moved into riskier assets to enhance yields, the report says that because of the very low levels of interest in developed markets, the pressure to earn reasonable yields could push them into riskier assets.
Graphic by Ahmed Raza Khan/Mint