Institutional investors around the globe believe they have a better handle on risk, but most worry about the challenges of rising volatility, inflation and low yields, according to a study by Natixis Global Asset Management (NGAM).
The study report says that many institutional investors are exploring new investment strategies and currently favour global and emerging market stocks, as well as real estate and private equity.
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The study found that 65% institutional investors are confident in their risk management approach, including 85% in the US. However, many institutional investors anticipate being challenged by severe market swings (75%), rising inflation (64%) and lower yields/weaker returns (90%).
A vast majority (88%) of respondents said meeting their total return objectives will be difficult. Six in 10 (60%) investors globally – and 88% in the US – said that traditional asset allocation and portfolio construction techniques are not ideal for today’s markets.
The study report also revealed that 89% institutions believe they’ll meet their future obligations, but 70% globally and 81% in the US believe individuals saving for retirement will fall short.
Well over half of institutional investors (58%) plan to add to their global equity holdings in 2013, followed by emerging market stocks (46%), the report added. More than 70% said setting strategic asset allocation and taking tactical advantage of market movements is challenging.
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By GlobalDataThe report added that 60% of investors plan to increase their allocations to alternatives, and believe they will perform better in 2013 than they did last year.
John Hailer, CEO of Natixis Global Asset Management in the Americas and Asia, said: "While markets have seen positive growth and less volatility, institutional investors still anticipate potential risks as a major challenge. They’re confident, but at the same time acknowledge that they need to manage risk more effectively."
The results, released by NGAM’s Durable Portfolio Construction Center, include insights from more than 500 institutional investors that collectively manage more than US$11.5 trillion in assets.
