Central banks and sovereign wealth funds are upping their bets on alternative assets in an attempt to beat equity markets.

More than two-thirds of the 100+ institutions polled in a recent State Street study showed appetite for commodity-related investments.

Meanwhile, it was found that most government pension fund respondents plan to invest in real estate over the next three years.

The general view is that an equity market correction will have a “moderate” or “significant” impact on investment strategies between now and the end of the decade. 

Global equities experienced a torrid start to 2016 as investor concerns over China’s currency, a possible US recession, falling commodity prices and worries about central bank credibility led to a broad-based sell-off.

“As uncertainty persists, official institutions are diversifying their portfolios and looking at new asset classes and markets,” a State Street statement released with the study said on Thursday.

Despite the weakened outlook for growth in China, Asia remains the most attractive region for investment with 63% of institutions from outside the planning to increase their investments there.

“A volatile investment environment calls for organizational agility and official institutions are learning to adapt and become more agile,” added Kevin Wong, managing director and head of sector solutions for State Street’s Global Services and Global Markets business in Asia Pacific.

“They demand strong, flexible investment teams supported by a nimble operating model that help them identify opportunities, manage risk exposure, and take corrective action.”

Risk management approaches 

The study also found that over half of the institutions surveyed have changed their risk management approach over the last three years, and two-thirds of all respondents are planning to make changes over the next three.

SWFs in particular have expanded the use of risk factor analysis over the last three years, along with the use of derivatives.

Three quarters of institutions in APAC say they are most likely to improve their risk management over the next three years, followed by 61% in EMEA and 56% in North and Latin America.

The study claims that both central banks and sovereign wealth funds are beginning to disclose more data about their investment priorities, risks, and holdings.

About half of all institutions expect to increase the amount of data they disclose publicly and the frequency of their reporting.

Effective technology, meanwhile, is seen critical in helping official institutions achieve their objectives.

“The extent to which SWFs and central banks are changing their approaches is sure to differ as a result of their different mandates, objectives, and circumstances,” added Wong.

“Above all, they must be able to adapt to the unpredictable market environment to ensure long-term success.”