April 08, 2026 — European institutions have increased expected returns on investment assets—a shift driven less by bullishness about future market direction and more by the changing composition of their portfolios.
Under increasing pressure to fund growing liabilities, European pension funds and other institutions are adjusting portfolio allocations in the hopes of enhancing investment returns. As part of that effort, they are reducing holdings of bonds and actively managed equities in favor of real estate, private debt and equity, and other alternative asset classes, and they are asking asset managers for customized offerings to help manage the resulting complexity.
The changing nature of European institutional portfolios can be seen in reported return expectations. As recently as 2023, the expected rate of return (ROR) on European institutional assets averaged 3.9%. By 2025, those expectations had increased to 4.4%.
Reduced allocations to equity and fixed income
Throughout Europe, average allocations to fixed income have fallen from post-COVID levels of about 61% of total assets to 58% in 2025.
“Although average fixed-income allocations cover a broad span that varies by country and investor type, the directional trend is consistent across the Continent. Institutions that have the flexibility to adjust allocations are moderating fixed-income exposure and adding risk assets to increase potential portfolio returns,” says Kryszia Bisson, Senior Relationship Director at Crisil Coalition Greenwich and coauthor of European institutions seek customized solutions from asset managers.
Overall allocations to equities also declined from 2024 to 2025. Over that period, European institutions shifted assets from active to passive strategies, increased allocations to global equities, and made plans to expand allocations to European equities.
“Changes to institutional equity portfolios are likely being driven, at least in part, by changing perceptions of the relative attractiveness of European versus U.S. stocks that have played out since the start of 2025,” says Kryszia Bisson.
Assets shift to real estate, private credit and equity, and other alternatives
Assets moving out of fixed income and other traditional asset classes are shifting mainly to real estate and alternative asset classes. Across Europe, average allocations to real estate increased to 7% of total assets in 2025 from 5% in 2024. Institutions report similar growth in alternatives, with average allocations climbing to 11% of total assets from 9% two years ago. At 15% of total assets, alternative allocations are highest in the Nordics and Italy.
Looking ahead, almost 40% of European institutions expect to significantly expand allocations to private equity in the next three years, and more than a quarter are planning major increases to private debt. Institutions are also planning to meaningfully expand allocations to other alternatives, including infrastructure equity and debt.
As rising exposure to risk assets ratchets up complexity, European institutions are seeking customized solutions from asset managers that help them analyze and manage their investments in their own way. European institutions seek customized solutions from asset managers presents the results of the Coalition Greenwich Voice of Client – 2025 Continental European Institutional Investors Study, analyzing how institutions are adjusting portfolios and strategies, and examining how they expect asset managers to help manage new challenges.