Institutional investors expect the liquidity crisis in the credit market will continue to spread into other structured products, according to a survey.

The Greenwich Associates survey finds that 55% of participants believe that the current credit crunch is a structural crisis while the rest see it as a short-term event.

More than 45% say they have deliberately changed their portfolio’s credit profile as a result of market conditions, including more than half of the institutions with US$100 billion in assets under management.

The moves were almost universally in the same direction: away from risk in general and from mortgage and real estate exposure in particular, and into higher-rated instruments, especially shorter-duration government securities.

“Institutions are also focused on limiting counterparty-risk in an atmosphere in which the full extent of the losses and exposures of individual counterparties can be difficult, if not possible, to ascertain,” says Greenwich Associates hedge fund specialist Karan Sampson.

The survey also reveals that more than three quarters of participants say the performance of collateralized debt obligations and other structured products in the current credit crisis has decreased their confidence in credit rating agencies.

There were 251 institutional investors in North America, Europe and Asia that took part in the survey.

To comment on this story, email craig.sebastiano@rci.rogers.com.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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