Coming out of the fastest market crash in history, asset owners are cautiously optimistic heading into a vastly changed investment landscape, according to a new survey by bfinance.
Indeed, 82 per cent of surveyed asset owners, including pension funds, endowments and sovereign wealth funds, said they’re satisfied with how their portfolios have performed so far this year. This is all the more remarkable considering close to a third (28 per cent) lost more than 10 per cent of their portfolio value during 2020’s first quarter.
Just 24 per cent of survey respondents said they’re changing their strategic asset allocation. The survey noted these largely fall along existing allocation change trends, with 48 per cent saying they expect allocation to private markets to increase this year.
Meanwhile, 35 per cent said they’re making changes to their risk management processes. However, respondents showed some stronger signs of frustration, with 54 per cent saying they’re likely to terminate relationships with managers, based primarily on their performance to date this year. As for asset classes, 53 per cent of asset owners using active emerging market debt strategies noted their dissatisfaction with these investments, along with 48 per cent of hedge fund investors and 64 per cent of alternative risk premia investors.
As far as outlook, 29 per cent of asset owners said they’re underweight in risk heading into the second half of the year, while 19 per cent are overweight. A few (13 per cent) said the inability to travel because of the pandemic is a major obstacle to selecting new asset managers and investments, while 31 per cent said it isn’t.
A third (33 per cent) said they’re investing in distressed or opportunistic strategies explicitly targeting fallout from the pandemic. More (42 per cent) said environmental, social and governance issues will become more important because of the coronavirus pandemic, while zero said it will become less important.
“2020 is not yet hindsight,” noted the survey. “Yet this period will, without a doubt, be crucially informative as investors adapt portfolios and prepare for an uncertain future.”