According to research by Pictet Asset Management, two-thirds of professional fund buyers in Asia and Europe believe that their clients still do not have enough allocation to private alternative investments. Matt Shafer, head of international distribution at Pictet Asset Management, predicts that the demand for private markets will surge in the coming years, akin to the rise of emerging market investments at the turn of the millennium. While investors once took some time to fully embrace complex emerging market equities and bonds, portfolios are now considered insufficiently diversified if they do not include investments in developing countries. In the coming years, a similar situation may occur in the private markets. The survey found that 76% of fund managers in Asia believe that their clients are under-allocated in private market strategies, while in Europe the figure is 64%. To increase allocation to private market assets, fund managers globally are seeking more favorable fee structures, increased transparency, and improved investment accessibility. Jessica Jones, head of Asia at Pictet Asset Management, stated that public markets are susceptible to short-term fluctuations, whereas private markets can provide investors with stronger risk-adjusted returns, hedging against volatility, and downside protection, thus providing much-needed diversification benefits in times of market uncertainty. The correlation between stocks and bonds has led 43% of fund managers to seek risk-diversifying investment tools, with 41% seeing private alternative investments as the preferred asset class. In particular, 59% of Asian respondents plan to increase their allocation to data centers, making it the top priority for real estate allocation in the next 12 months. Jessica added that there is strong interest among Asian investors in global data center strategies. The development of digitalization and generative AI has created cross-generational growth opportunities for data centers, making them a potential mainstream investment. In terms of asset class return expectations in the next year, fund managers are optimistic about both public and private fixed income prospects. In the realm of public fixed income, 59% of fund managers expect returns to increase, with only 25% predicting a decrease. As for private fixed income, 50% of fund managers anticipate an increase in returns, while 26% expect a decrease. Fund managers are optimistic about bond market returns, with 52% expecting their institutions to increase allocation to public fixed income next year, the highest among all asset classes. Infrastructure and public stocks follow public fixed income as the next largest increase in allocation targets. Matt understands the desire of fund managers to increase fixed income allocation due to many investors still holding significant amounts of cash. He mentioned that while cash rates may still be relatively high in many regions globally, the certainty of expected cash returns will gradually decrease over time. In contrast, given the longer-term maturity and expiry dates of bonds, fixed income can provide investors with more certainty in achieving target return levels. In fact, the risk of holding cash may be higher in the long run, especially as many central banks have begun cutting interest rates. Fund managers have mixed views on stock returns, with only 10% expecting an increase rather than a decrease in returns for public and private equities. Most fund managers predict that the investment environment in the next 12 months will face heightened stock market volatility and geopolitical risks, especially considering recent elections in the UK and France, while the U.S. presidential election in November 2024 will also amplify long-term factors affecting the investment environment. Global stocks are the top target for fund managers to increase holdings, followed by various thematic stocks, with European and Asian fund managers showing some level of preference for domestic stocks. As large-cap stocks have been on an upward trajectory for some time, 64% of global fund managers currently see a rebound in mid-cap stocks over the next 12 months, while 58% expect growth stocks to outperform value stocks. Matt added that although rate cuts may benefit the stock market, it is fundamentally the key driver of long-term stock performance. The macroeconomic environment has been dominating investment narratives for some time, but fundamentals are expected to once again become the focus of fund managers, as companies must demonstrate sustainable profit growth and strong demand to achieve outstanding performance. This aligns with the outlook for corporate earnings, where growth stocks are expected to achieve stronger profit growth compared to value stocks, which are more dependent on economic cycles.