Institutional investors in Canada plan to raise their alternative investment allocations, with real estate being the most preferred asset class.

These are the findings from a study by CIBC Mellon, which surveyed 50 Canadian institutional investors.

Fifty eight percent of the investors said that they expect alternative allocations to rise over the coming 12 months.

Of investors polled, 42% said that they prefer real estate while 20% favoured infrastructure.

Private equity, private debt / loans, and hedge fund investments were preferred by 18.7%, 17.9%, and 1.4% of the investors, respectively.

However, when queried about satisfaction, majority cited private equity.

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According to 47% of the investors, performance of private equity “exceeded expectations”.

On the other hand, investors were the least satisfied with the performance of real estate.

Thirty percent of the investors opined that real estate performance was “worse than expected” while 12% said it was “ahead of expectations”.

In the alternatives space, lower fees, increased transparency through technological innovation, and focus on ESG were cited as the key trends over the coming year.

When asked about their distinguishing features, half of the investors highlighted more priority on co-investment and direct investment.

Greater tolerance of investments requiring long hold periods and priority on technology to reduce costs were cited as distinguishing factors by 40% and 38% of the respondents, respectively.

CIBC Mellon director of alternatives Jon Lofto said: “Alternatives continue to gain momentum among Canada’s institutional investors as they seek investments that can shelter their capital from short-term risks and market movements while also generating strong returns, though we are seeing Canadian investors becoming more particular about how they deploy their capital.”