Investment Trends

North American Institutional Markets 2023: Abundant Opportunities Despite Asset Declines

Institutional investors increase allocations to fixed income and alternatives

A new report from Cerulli Associates reveals institutional investors use rising rate environment to their advantage. Access the complete report here.

–December 8, 2023, BOSTON—Inflation, market volatility, and lower expected investment returns challenged institutional investors throughout 2022 and early 2023, yet investors remain optimistic, according to The Cerulli Report—North American Institutional Markets 2023: Abundant Opportunities Despite Asset Declines.

In the first half of 2023, there was great uncertainty about whether a recession was imminent. However, 84% of institutional investors expected the economy would avoid a full recession, and many (44%) believed the Federal Reserve would succeed in its attempt at a “soft landing.”

Adjusting To The New Investment Environment

To adjust to an entirely new and unpredictable investment environment, institutional investors (68%) indicated that they would take advantage of higher interest rates and increase their allocations to public fixed-income investments. According to the research, almost three-quarters of institutional investors (70%) expect to increase their allocations to actively managed fixed-income strategies over the next 24 months. “This presents a significant opportunity for asset managers with strong fixed-income capabilities and performance,” says Chris Swansey, senior analyst.

With portfolios designed to enhance returns over the long term, institutional investors are prepared to withstand short-term economic shocks...

Moreover, a majority (55%) of institutional investors are responding to rising interest rates by increasing their allocations to alternative investments. Private credit strategies have become particularly attractive alternative investments—nearly half (47%) expect to increase their allocation over the next 24 months.

In addition to seeking exposure to public fixed-income and alternative investments, institutional investors are prioritizing several factors beyond investment performance. Asset managers can position themselves to win institutional mandates by charting a clear succession plan (43%), having a well-established investment team (41%), and demonstrating expertise through thought leadership (43%).

“With portfolios designed to enhance returns over the long term, institutional investors are prepared to withstand short-term economic shocks,” says Swansey. “This allows them to be opportunistic during times of market volatility and take advantage of lower-than-normal valuations,” says Swansey. “Managers that offer these exposures and highlight factors beyond investment performance will be well poised for mandate wins in this market,” concludes Swansey.




About Cerulli Associates
For over 30 years, Cerulli has provided global asset and wealth management firms with unmatched, actionable insights.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.