A majority (79 per cent) of institutional investors see a global economic slowdown as the top threat to their portfolios in the next 12 months, according to a new survey by Schroders.
Prompted by coronavirus-related concerns, it’s a big jump from the 49 per cent of respondents that said the same in 2019. Those concerns are also putting pressure on return expectations. Just 33 per cent said they’re confident they’ll be able to secure their anticipated returns this year, down from 52 per cent in 2019.
The survey also found private assets look somewhat more attractive this year, with respondents saying they intend to increase their allocations to these assets, from 12.8 per cent in 2019 to 14.1 per cent this year. About half (46 per cent) said the increased allocation to private assets would help manage risk. Private equity, infrastructure equity and private debt were most cited as assets to which investors intend to up their exposure in the next three years.
In addition, 71 per cent of institutional investors said the pandemic has prompted them to seek out undervalued assets, while 26 per cent said they’ll continue to diversify away from listed assets in a bid to mitigate risk.
“Historical crises have shown that portfolios with significant exposure to private markets can achieve long-term investment performance,” said Georg Wunderlin, Schroders’ global head of private assets, in a press release. “The institutional investor study shows that investors continue to be attracted to private markets to increase diversification and access specialized, alternative return streams. These characteristics can become especially valuable at times when the global outlook remains so unclear.”
The survey also found that other concerns have taken a backseat to the coronavirus. Just 23 per cent of investors said they’re concerned about the tapering of monetary policy, down from 44 per cent in 2019. And far fewer (16 per cent) said they’re worried about rising interest rates than in 2019 (55 per cent).
And while most investors (91 per cent) said they’re confident the pandemic will cause a major global recession, just over half (53 per cent) said they won’t make portfolio shifts until the situation becomes clearer.
As for specific goals, only 31 per cent of investors cited income generation as a primary investment objective, compared to 66 per cent last year. Meanwhile, 64 per cent called capital preservation a core objective, up slightly from 57 per cent in 2019.