Majority of U.S. investors adjusting investment strategy to address new market regime, Schroders study finds

11-14-2023
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November 14, 2023

New York, NY – Schroders, a global asset manager, today released the findings of its annual Global Investor Study which found that major macroeconomic trends including deglobalization, decarbonization and changing demographics are driving U.S. investors to rethink their investment strategy.

Schroders’ Global Investor Study surveyed over 23,000 investors (including 1,500 in the U.S.) to gauge investor sentiment on key trends impacting the investment landscape, including inflation, climate change and market volatility. 

The changing economic regime is driving an investor “recalibration”

Most (91%) U.S. investors agree that we are witnessing a new regime in economic policy and market behavior, driven by global inflation and interest rates. This sentiment is much stronger among U.S. investors than their global counterparts, among which only 78% agree that they are witnessing this shift. 

As part of this, U.S. investors are assessing the impact of the “higher for longer” interest rate environment and persistent inflation on portfolios and recalibrating them to account for this changing economic regime. Seventy-three percent of U.S. investors stated that they have changed their investment strategy in light of rising inflation, starkly higher than the global average of 54%.  

While change, and the uncertainty it brings, can often breed fear and pessimism among investors, those in the U.S. are still optimistic. Eighty-two percent of surveyed U.S. investors believe that their returns over the next year will be higher than what they have achieved in the past 12 months. Additionally, investors are not shying away from higher-risk investments. Eighty-one percent of U.S. investors describe their current level of risk tolerance as higher compared to the last five years, while only 19% say they have seen no change or have a lower risk tolerance.

Adam Farstrup, Head of Multi-Asset, Americas commented: “At Schroders, we look at the current shift happening in the markets and economy as the 3D Reset, due to the “three D’s” we believe are driving this change – decarbonization, demographics and deglobalization. Investors are taking note of these new and unique market conditions and are becoming increasingly adaptable to adjusting investment strategies and exploring new asset classes, including private assets and commodities, to generate returns.”

Personalization is key for U.S. investors to invest sustainably

The majority (59%) of U.S. investors strongly agree that encouraging companies to adopt sustainable practices will help generate long-term value. However, U.S. investors do not want a “one size fits all” strategy for incorporating sustainability into their portfolios. Sixty-seven percent of U.S. investors indicated that the ability to choose investments aligned to their personal sustainability preferences would encourage them to increase sustainable investments, as compared to 56% of global investors.

Other factors that U.S. investors would encourage them to invest sustainably include:

  • More education about sustainable investment in general (61%);
  • Data that shows investing sustainably delivers better returns (45%); and
  • Regular reporting showing the impact of their investments on people and the planet (42%).

The “E” in ESG is also becoming a bigger priority for U.S. investors as we see further talks advance around carbon emissions and increasing interest from the public and private sector in renewable energy alternatives. Forty-seven percent ranked climate as the top area that asset managers should engage with companies on, up from 41% in 2022, and 65% of surveyed investors do not want to invest in funds holding companies with high emissions.

U.S. investors are also more familiar with and proponents of the concept of active ownership, or engaging with companies to encourage them to adopt sustainable practices to generate long-term value. Nearly three-quarters (72%) of U.S. investors recognized this definition of active ownership, as compared to 44% of global investors. Further, ninety-four percent agreed that active ownership can help companies generate long-term value, compared to 83% of global investors.

Marina Severinovsky, Head of Sustainability, North America, commented: “Companies across industries face a wide range of challenges, opportunities and intensifying pressures to adapt and evolve as the impacts of climate change and decarbonization become real costs. U.S. investors’ focus on this through investment choices and active ownership reinforces our belief at Schroders that engagement with companies can drive meaningful, value-oriented corporate change that may result in increased investment returns.”

Private assets attraction grows amid democratization

The increased accessibility of private assets for retail investors has significantly impacted the way the majority of U.S. investors think about the asset class, with 53% believing that private assets have become more attractive in the last six months specifically.

There are two key factors driving U.S. investors’ interest in the asset class: higher average performance (79%), and perceived sustainability credentials (57%, compared to 40% of global investors).

When considering where to allocate private investment dollars, private equity is the preference for the majority of U.S. investors (52%), followed by:

  • Real estate (18%)
  • Infrastructure and renewable energy (11%)
  • Insurance linked securities (8%)
  • Microfinance and impact orientated investments (5%)
  • Private debt (3%)

However, U.S. investors still cite some challenges with increasing allocation to private assets. In ranking the most prominent barriers to entry, forty-eight percent highlighted the illiquid nature and the required longer holding period as a top factor, followed by a perceived lack of transparency (20%) and investment costs and expenses (13%).

Lee Gardella, Head of Private Equity, North America, said: “U.S. investors are continuing to take note of the expanding opportunity set within private assets, and it’s clear that the democratization of the asset class is more than a passing trend. What it represents is a positive transformation, expanding access to the investing marketplace as we know it. As this year’s findings emphasize, private assets – and private equity especially – represent an attractive opportunity set in an increasingly challenging time to be interpreting markets.”

Note to Editors

Between 26 May and 31 July 2023, Schroders commissioned an independent online survey of over 23,000 people who invest from 33 locations around the globe. This spanned countries across Europe, Asia, the Americas and more. This research defines people as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years. Due to this threshold, Schroders acknowledges that this group and therefore the research findings are not representative of everyone’s experience.

Note: Figures in this document may not add up to 100 per cent due to rounding and multi-select options.

For trade press only.  To view the latest press releases from Schroders visit: Newsroom - Media Relations - Schroders

Schroders plc

Schroders is a global investment management firm with $923.1 billion (€846.1 billion; £726.1 billion) assets under management, as at 30 June 2023. Schroders continues to deliver strong financial results in ever challenging market conditions, with a market capitalisation of circa £7 billion and over 6,100 employees across 38 locations. Established in 1804, the founding family remains a core shareholder, holding approximately 44% of Schroders’ shares.

Schroders has benefited from a diverse business model by geography, asset class and client type. It offers innovative products and solutions across four core growing business areas; asset management, solutions, Schroders Capital (private assets) and wealth management. Clients include insurance companies, pension schemes, sovereign wealth funds, high net worth individuals and foundations. Schroders also manages assets for end clients as part of its relationships with distributors, financial advisers and online platforms.  

Schroders aims to provide excellent investment performance to clients through active management. It also channels capital into sustainable and durable businesses to accelerate positive change in the world. Schroders’ business philosophy is based on the belief that if we deliver for clients, we will deliver for our shareholders and other stakeholders.

Contacts

Jennifer Manser, Schroders

Jennifer.Manser@schroders.com

212.632.2947

Bridget Coffey, Prosek

bcoffey@prosek.com

508.686.6461

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