Schroders survey reveals renewed confidence in emerging markets
At a recent Schroders Investment Conference in Prague , over 100 intermediary clients attended from more than 30 countries in Europe, the Middle East, Asia, the US and Latin America. They were surveyed on their outlook for several asset classes, as well as their views on interest rates and inflation over the medium term.
The results highlighted that emerging markets are an area of particular interest to clients at present, with almost half (49 per cent) currently having an overweight allocation to the region and seven-tenths (70 per cent) looking to increase this allocation over the next six to twelve months. Only 5 per cent are looking to reduce their allocation in this period.
This is undoubtedly related to the fact that almost half (45 per cent) of those surveyed expect emerging markets to be the best performing equity market in 2015. Asia (ex Japan) and Europe were also tipped as markets likely to perform well, with twenty per cent and sixteen per cent respectively opting for these markets. Overall, ninety-four per cent intend to retain or increase their exposure to equities in the coming months, with more than two-fifths (41 per cent) expecting the most dramatic increase in allocation to be to emerging market equities.
On the macroeconomic side, the survey highlighted some clear trends in expectations for central bank activity and monetary policy in 2015 and beyond. Almost half (48 per cent) expect the US Federal Reserve to be the first central bank to raise interest rates, with more than four-fifths (81 per cent) expecting a rate rise in the US to come next year, and a third (33 per cent) expecting this to happen in the first half of the year.
In contrast, only seven per cent expect to see an interest rate rise from the European Central Bank in 2015, while over half (58 per cent) see deflation in Europe as the biggest macro risk facing investors. Despite deflationary concerns in Europe, ninety per cent of those surveyed believe that the average inflation rate for the G7 countries will increase to three per cent in the next two to three years.
Carlo Trabattoni, Head of Pan European Intermediary Distribution and GFIG, said: “Overall, these results are consistent with the anticipated trends indicated in the same survey from last year, where over half expected to increase their exposure to emerging markets. This year’s survey indicates that allocations to emerging markets have indeed increased, and this trend is expected to continue into next year, with investors citing the region as the area they expect to perform best in the year ahead. This also corresponds with the client demand that we are currently experiencing for emerging and frontier markets.
“Given that a rate rise in the Eurozone is still expected to be some way off, it is not surprising to see that interest in risk assets has stayed consistent from last year, with the vast majority intending to increase or retain their allocation to equities over the next year. However, with interest rate rises in the US and UK potentially beginning to take place next year, we would also expect to see additional interest in asset classes that can benefit from a rising rate environment.”
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Schroders is an independent, global asset management company with 210 years of financial experience which has resulted in a world-class approach to investment. We currently manage CHF 395 billion on behalf of our institutional, retail and private clients. Our aim is to apply our specialist asset management skills in serving the needs of our clients. With an international network spanning 37 offices in 27 countries and over 393 investment professionals covering the world’s investment markets, we offer our clients a comprehensive range of products and services. In Switzerland, Schroders is represented by Schroder Investment Management (Switzerland) AG, a fund management company with offices in Zurich and Geneva, overseeing in excess of CHF 20 billion for institutional and intermediary clients and offering local fund management capabilities in Multi Assets, Swiss and European Equities, Convertible Bonds, Insurance Linked Securities (ILS) and Swiss and European Properties.Further information about Schroders can be found at www.schroders.ch. Source: Schroders 31.6.2014