Schroders

Investment Outlook

Institutional Investor Study
2020

Schroders’ annual Institutional Investor Study analyses the investment perspectives of 650 institutional investors, collectively responsible for $25.9 trillion in assets and from 26 locations across the world. The research was conducted in April 2020, as the scale and global impact of the Covid-19 crisis had taken hold.

Institutional investors’ attitudes to the investment outlook:

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Fears that a global economic slowdown will affect investment performance have almost doubled since last year, driven by the Covid-19 pandemic.

2018

2019

2020

Consequently, previous years’ primary concerns about monetary policy tapering, higher interest rates and regulation have dropped significantly as Covid-19 has consumed the investment outlook.

Higher interest rates

64%

55%

16%

Regulation

34%

24%

15%

Tapering of monetary policy

46%

44%

23%

The research for this year’s Study was conducted in April 2020 as the scale and global impact of the Covid-19 crisis had taken hold. Here are global investors’ thoughts on the impact of Covid-19 at that time.

Pie chart for Covid-19 impact on business

91%

The Covid-19 pandemic will cause a major global recession

81%

The Covid-19 stock plunge presents a good buying opportunity

53%

We will not make any portfolio changes until the outlook is clearer

44%

The liquidity provided by central banks does not help us to manage the downside risks caused by a pandemic

42%

We have diversified into alternatives, real assets and private market assets to reduce the impact of market volatility caused by Covid-19

27%

Fiscal and monetary policy can do little to help mitigate the impact of the outbreak

Institutional investors understand the likely negative impact the Covid-19 crisis has had, and will continue to have, on their portfolios but their return outlook for the next five years remains broadly positive...

expect annual total returns of 5-9%

….yet confidence in achieving these returns has dropped across all regions.

2019

2020

EMEA

North America Image of a continent

Asia-Pacific Image of a continent

Latin America Image of a continent

Investors’ falling confidence is compounded by the pressure to maintain funding levels and solvency ratios. Capital preservation is now considered the most important investment objective globally for the next 12 months.

2019

2020

Capital preservation

Funding liabilities

Capital growth

Generating income

Continuing uncertainty has seen liability and cashflow driven investment strategies grow in importance as institutional investors explore solutions that enable them to meet their liabilities.

Liability and cashflow focused investment strategies are crucial to our strategy

2018

2019

2020

North America

EMEA

Asia-Pacific

Latin America

The need for certainty is also seen in risk management strategies where diversification and tactical asset allocation are cited as the top strategies.

- 2018
- 2019
- 2020
Diversifying across asset classes & geographies
- %
- %
- %
Tactical or dynamic asset allocation
- %
Currency hedging
- %
- %
- %
Increasing use of private assets
- %
- %
- %
Increasing allocations to fixed income
- %
- %
- %

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Private Assets Sustainability

Schroders commissioned CoreData to conduct the fourth annual Institutional Investor Study to analyse the world’s largest investors’ key areas of focus and concern including the macroeconomic and geopolitical climate, return expectations, asset allocation and attitudes to private assets and sustainable investing. The respondent pool represents a broad spectrum of institutions, including pension funds, insurance companies, sovereign wealth funds, endowments and foundations owning approximately $25.9 trillion in assets. The 650 respondents were spilt as follows: 179 in North America, 248 in Europe and South Africa, 173 in Asia-Pacific and 50 in Latin America.

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