In the firm's latest study, which interviewed 210 asset allocators, all of whom have AUM of at least $1bn, fixed income was the most popular asset class by far, with 58% of asset allocators expecting to increase investment in fixed income, compared to 7% who will decrease it.
Meanwhile, the net demand for private equity sat at 17%, while public equity was at 14%.
Appetite for bonds not abating in face of 'exaggerated' 5% Treasury yields
While respondents were slightly pessimistic about the prospects of the global economy and risk assets, opinion varied widely, with over a third predicting that global growth is set to accelerate.
Within fixed income, half of respondents are set to increase positions in green bonds and investment-grade credit over the next year, followed by sovereign debt at 43%. Emerging market debt saw a key regional difference, with 51% of Asian respondents looking to increase exposure to the asset class compared to 36% of European respondents.
The trend towards ESG continued in equities, with seven in ten respondents believing it was important for funds focused on global decarbonisation efforts to disclose "avoided emissions" for holdings — a disclosure that remains scarce today.
Within equities, the first target for respondents over the next year was global equity at 51%, while emerging markets (ex China) saw 44% expecting to elevate exposure to the region.
Similar to fixed income, regional bias seemed to play a factor, with 65% of Asian fund selectors set to boost positions in Asia-Pacific equities while only 41% of Europeans said the same.
Meanwhile, European stocks saw 39% of European respondents set to increase their position, compared to just 24% of Asian selectors.
Bond sell-off fails to stifle fixed income flows while equities shed £1.6bn
Matt Shafer, head of international distribution at PGIM Investments, said: "The revival of fixed income is undeniable and demand for the asset class continues to gather pace with our investors."
"With the majority of rate hikes now in the rearview mirror, we could also see reduced fixed income volatility and a reemergence of the ‘search for yield' — which can provide an additional performance boost for bond strategies."