All major categories of institutional investors — including pension funds, mutual funds, insurance companies, savings institutions and foundations — have remained fundamentally committed to the same investment policies they were using before the financial crisis.

For decades institutional investors had been shifting allocation preferences from fixed-income securities into equity, according to Matteo Tonello, associate director of corporate governance at The Conference Board and co-author of the yearly Conference Board Institutional Investment Report, Trends in Asset Allocation and Portfolio Composition.

The report gives an analysis of the asset growth and portfolio composition of institutional investors in the US. It documents the presence of different types of institutional investors in single asset classes, such as equity, debt securities, alternative instruments including hedge funds and foreign securities.

By the end of 2008 institutions had only 36.6% of their assets in equities, down from 47.2% at the end of 2007, the report revealed. These revisions appear to have been driven by market declines rather than by changes in investment policies, concluded the report.

At the end of 2008, when measured as a percentage of outstanding US financial assets, institutional assets had reached their lowest level since 1980. The industry reported substantial losses across virtually all asset classes, with total institutional assets falling 21.3% to $22,251.7 billion, a level similar to 2004.

Mutual funds and other investment companies that had seen the fastest growth in the last few decades were hardest hit the by the market decline and capital withdrawals. Outflows totalled $2,503.5 billion for the year, 30.7% of their 2007 asset value.

Pension funds lost 24.1% of their 2007 asset value while insurance companies experienced a 7.8% contraction.

Declines in capitalisation occurred fairly evenly across the institutional investor spectrum, revealed the report, without significant changes to the share of total institutional assets held by type of institution. Pension funds are still the leading category, holding 38.6% of total institutional assets.

Mutual funds have grown into the investor category with the highest exposure to equity. At the close of 2008, as a result of stock market correction and the 455 median loss suffered by their equity portfolios, mutual funds reported much more balanced asset allocations.

Insurance companies were the least affected by plunging stock values. They have lower exposure to stock. Their asset allocation was the least affected by the market fall.

Institutional investors remain committed to alternative investment strategies. However, the value of alternative asset classes may not yet fully reflect the losses of the public market.

Mutual funds remain major investors in non-US securities, driven by the growing demand for diversification of household savings. In 2008 total assets held in foreign securities by the 25 pension funds with largest foreign allocations amounted to $206,920 million compared with $210,320 million of total equities held by the 20 largest mutual funds focusing on international investment strategies.