Report Shows US Institutional Assets in 2009 Rebound

(November 12, 2010) — A new report has revealed that US institutional assets have risen to pre-crisis levels.

“For decades, institutional investors have been shifting their allocation preferences from fixed-income securities into equities. Findings illustrate that in 2009, after a one-year hiatus, institutional investors resumed this trend,” Stephan Rabimov, an economist who has co-authored The Conference Board study since 2004, said in a statement. “By the end of the year, institutions invested 40.4% of their assets in equities and 38.6% in fixed-income, with the remaining 21% nested in other asset classes.”

In 2009, institutional assets in the US grew 14% to $25.351 trillion, amounting to a rebound to levels recorded between 2005 and 2006 when assets were $23.935 trillion and $26.439 trillion, respectively, the report showed.

Of the US institutional investors surveyed, US pension plans were the largest group — representing 39.9% of all institutional assets as of the end of December 2009. Investment companies (28.4%), insurance companies (24.4%), savings institutions (4.9%); and foundations (2.3%).

Other finding from the The 2010 Institutional Investment Report include:

• Equities remained the investment of choice for state and local pension funds and open-end investment companies, whereas life insurance companies invested as much as 63.4% of their assets in securities that guarantee a fixed income.

• Pension fund managers increased exposure to alternative assets: The study noted that by the end of 2009, up to 27.9% of total pension assets were invested in alternative instruments (which includes real estate, private equity, hedge funds, and cash equivalents), the highest level seen by the industry to date.

• Hedge fund industry consolidation is still in process. Throughout 2009, the number of funds pursuing this type of investment strategy remained at the level during the peak of the recession, reflecting the fact that the financial difficulties favored industry consolidation and restructuring. Liquidations of hedge funds and funds of hedge funds amounted to 812 by the end of 2008, and an additional 234 entities closed their operations in 2009.