Of the 22 international wealth managers which took part in the survey conducted between April and June, 84 per cent expect to increase their asset allocation to the high-growth region over the next year.

A third plan to boost their exposure to Latin America and the Middle East.

In terms of sectors, 40 per cent are expecting to increase their equity exposure over the next year, while 31 per cent want to grow their portfolio allocation to alternative investments.

Although most currently have a cautious allocation to private equity – either at or below benchmark – half plan to increase their exposure to the sector as a source of high returns, in spite of the high risks.

Scorpio said that within alternatives, hedge funds are the most popular sector. At the low-risk, low-return end of the alternative investment spectrum, the move highlights the need for defensive strategies in client portfolios.

Meanwhile, 41 per cent are reducing exposure to fixed income, and cash allocations are also being held or reduced. This is a reflection of concerns about inflation and the impact of the Eurozone debt crisis, said Scorpio.  

Cath Tillotson, co-author of the report and managing partner at Scorpio, said that complex economic and market factors are forcing wealth managers to reassess how they generate above-average returns with solid downside protection and an inflation hedge.

“Many recognize that emerging markets and equity markets offer an attractive source of investment return, but with heightened volatility, persistent concerns about the robustness of the recovery and frontier market fear, managers need effective strategies to counterbalance the associated risks,” said Tillotson.

The participants included universal banks, private banks, private client asset managers, multi-family offices and single-family offices.

The full bi-annual survey, HNW Asset Allocator III: Revaluating Risk and Return in Private Client Portfolios, is published today.