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Global investors are shoring up portfolios against economic downturn, with plans to cut allocation to publicly listed equities in 2019 in favour of assets such as private equity and real estate, according to the results of a BlackRock survey.

More than half of the 230 institutions managing US$7-trillion of inevitable assets surveyed by BlackRock plan to decrease allocation to public equities this year, up from 35 per cent in 2018, the survey, released on Monday, showed.

Global stocks suffered their worst year in over a decade in 2018, with trepidation surrounding economic slowdown, trade tension and rising interest rates infecting the market in the second half of the year. Markets have been similarly volatile at the start of 2019.

Equities appear to be especially in disfavour in the United States and Canada, with 68 per cent of investors there planning to reduce allocations, versus 27 per cent in continental Europe, the survey showed.

Underpinning this rebalancing is concern that the economic cycle is turning, as cited by 56 per cent of clients.

While strong economic data in the United States and a dovish message from U.S. Federal Reserve chair Jerome Powell on Friday have helped to alleviate some worries, the U.S. and Canada-based investors were most concerned about rising U.S. interest rates, BlackRock said.

This represented just over half of those surveyed (52 per cent), while geopolitical instability and trade tensions were cited as bigger concerns by European and Asian accounts.

BlackRock said private assets and fixed income are likely to be the main beneficiaries of the shift in sentiment in 2019, as investors search for uncorrelated sources of returns.

As such, 54 per cent of those surveyed intend to increase exposure to real assets, 47 per cent planned to boost private equity allocations and 40 per cent chose real estate.

Flows to fixed income are expected to increase to 38 per cent from 29 per cent a year earlier. Within this asset class, private credit is set to benefit – 56 per cent of those surveyed globally planned to increase allocations to the sector.

Cash will also be a key part of portfolios though BlackRock highlighted regional differences. Of Asia-Pacific accounts, 33 per cent planned to increase cash holdings while 27 per cent of continental European accounts aimed to decrease cash.

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