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A significant proportion of 55% of global institutional investors firmly believe in their capacity to wield considerable influence over the course of the energy transition. They assert this belief primarily through strategic investments in alternative energy and emerging infrastructure ventures. This tendency arises amidst a backdrop characterized by escalated geopolitical tensions, heightened interest rates, sustained market volatility, and coming electoral events.

Nuanced insights gleaned from Nuveen’s fourth annual EQuilibrium Global Institutional Investor Survey, released on March 21, emphasize this sentiment. Conducted during October and November 2023, the survey engaged over 800 institutional investors managing assets worth a staggering $18 trillion. Results reveal that 57% of investors have already incorporated or actively pursued exposure to alternative energy realms, encompassing renewables, nuclear, and hydrogen power. Additionally, 51% express a keen interest in channeling resources into nascent infrastructure undertakings. In particular, those related to energy storage, grid innovations, and battery technologies.

A discernible trend emerges, indicating a progressive shift towards private markets among global institutional investors. More than half, constituting 55%, harbor intentions of increasing their involvement in private markets within the coming half-decade. Predominantly, private credit and private equity stand out as favored avenues for such efforts.

Nonetheless, this enthusiasm reflects a slight downturn compared to the prior year. A 72% of global institutional investors harbored intentions of bolstering their presence in private markets. Within the fixed income landscape, a substantial 48% of investors outline plans to bolster their allocation to investment-grade fixed income over the ensuing two years. This shows a marked preference within this asset category.

Mike Perry, Nuveen’s Head of Global Client Group and Global Product, highlights a prevailing interest in corporate debt across various fixed-income segments. Corporates emerge as the preferred choice among investors, spanning investment-grade, below-investment-grade, and private fixed-income markets.

Perry identifies three gen themes driving investors’ strategic positioning within portfolios amid the evolving landscape. Foremost among these is an avid appetite for exposure to energy innovations and infrastructure ventures as the energy transition unfolds. Concurrently, private credit and private equity assume priority status amidst the escalating allocation toward alternative investments.

Moreover, investors are strategically hedging against a new model characterized by enduringly raised interest rates. Accordingly, 50% of global institutional investors intend to extend portfolio duration in 2024. This will reflect a notable uptick from the previous year’s 39%.

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