Rising inflation globally is forcing asset managers to reallocate their capital into commodities and real estate, according to new research from Clearwater Analytics (CWAN).

A poll of over 100 firms representing more than $5 trillion in AUM shows that the majority of asset managers favour commodities (58%) and real estate (55%) as their preferred asset classes to combat rising inflation. Interestingly, 42% also see listed equities as part of their asset mix. The research follows the U.S. inflation report last month which showed prices rising at their fastest pace in four decades. While in the UK, prices have also risen sharply in recent months, with the rate of inflation predicted to reach around 7% by spring 2022 according to the Bank of England (BofE).

The findings also show that over two thirds (68%) of asset managers surveyed do not believe that inflation is transitory, a stark contrast to the wider macro-economic consensus over year ago. Naturally, fixed income is also a major focus with over half (58%) of asset managers saying that they plan to reduce their allocations or risk profile as the Fed responds with future rate hikes.

Steve Doire CFA, Strategic Client and Platform Advisor, who conducted the research, commented: “The prevailing view that we are in a transitionary inflation cycle has unequivocally shifted. With nearly half of asset managers predicting that CPI will settle in at 3-4% and 19% seeing that even higher, there is a clear move to developing more aggressive investment strategies focused on commodities and real estate.” 

Doire went on to say: “As inflation continues to climb, investing in real-estate could help combat the portfolio effects of inflation for asset managers.”