Investment consultants, institutional asset owners and intermediaries worldwide forecast significant fixed income restructuring this year amid concern about rising interest rates and a jump in real assets investing, according to the 2014 Global Investor Survey, the eighth annual report from Casey Quirk and eVestment.
The insights from more than 200 survey participants suggest competition will heat up this year among investment managers. Combined, expected search activity in 2014 from manager replacement in domestic (home country) equity and fixed income, and EAFE equity categories will increase to 58% from 45% in 2013, according to the survey.
New searches in domestic fixed income will favor unconstrained strategies to mitigate investor concern over rising rates.
Respondents to the 2014 Global Investor Survey include more than 65 investment consultants worldwide with us$3.7 trillion in assets under advisement, and more than 135 institutional investors globally overseeing us$1.6 trillion in assets, who participated in the survey for the first time.
The latter group includes corporate and public pensions, non-profits, defined contribution plans, outsourced CIOs, multi-employer funds and retail intermediaries. More than 40% of the survey respondents were located outside of the US. The survey was conducted between November 7, 2013 and January 27, 2014.
Other key findings include:
- The rising interest rate environment was the biggest concern among all respondents, with an average of 53% citing this as a major concern;
- Surging appetite for real assets as asset owners continue to diversify their alternatives portfolios. Real assets represent the largest category of new search activity for consultants in 2014, representing 14% of forecasted new search activity, versus 6% in 2013;
- More implementation of outcome-oriented investing, as the asset allocation and buying behavior of investors continue to diverge at an accelerating pace. This reflects the long-term desire of asset owners worldwide to design policy allocations around specific objectives, which differ from investor to investor;
- Significant realignment of fixed income portfolios, with 48% of all participants expecting to restructure them – in particular, as corporate pensions continue to adopt LDI and rate-concerned investors delink their portfolios from interest rate sensitive strategies;
- Continuation of the long-term trend away from home-country-biased portfolios, driving the need for global data and analytics.
Jim Minnick, founder and CEO, eVestment, said: "This survey offers a comprehensive global snapshot of the concerns and plans of the institutional investment community this year and looking forward. As the investment community becomes more global, more complex and we emerge from a period of low interest rates and global economic concern, this kind of information is crucial for asset managers seeking to better map strategies."
Jeffrey Levi, director at Casey Quirk, said: "The survey findings indicate that to be successful, fund managers will have to become adept at meeting the needs of asset owners seeking specific solutions, elevate their fixed income game, and shift more rapidly to offering a globalized investment framework that incorporates both traditional and alternatives skills."