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Institutional Investor Study 2019

Geopolitics and investor expectations

Schroders’ third annual Institutional Investor Study analyses the investment perspectives of 650 institutional investors, collectively responsible for $25.4 trillion in assets and from 20 locations across the world.

The Study provides a snapshot of some of 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.

Four key conclusions drawn from this year's study are:

52%

cite macro and geopolitical risks as their greatest concern to portfolio performance in the next 12 months vs. 32% in 2017.

53%

feel they need customised Solutions as their needs are not being met by ‘off the shelf’ products.

52%

are looking to increase their exposure to Private Assets over the next three years.

75%

believe Sustainability will play a more important role in the next five years.

Geopolitical turbulence is seen as the most significant influence on a portfolio’s investment performance for the next 12 months, with institutional investors being more concerned than ever about how world events may affect growth

2019
2018
2017

The belief that stronger economic growth will shape portfolio performance has been steadily declining over the last three years

In contrast, factors previously deemed to likely have considerable influence on portfolios – such as higher interest rates and regulation – have decreased in importance

Chart graphic

Higher interest rates

Chart graphic

Tapering of monetary policy

Chart graphic

Regulation

Despite these macroeconomic pressures, investors’ total return expectations for the next five years – and confidence in achieving these – remain steady

67%

Global institutional investors expect annual total returns above 5% over the next five years.

13%

Asia-Pacific institutional investors are most optimistic, with 13% forecasting returns above 10% over the next five years and 61% anticipating returns between 5-9%.

0%

North American institutional investors also have relatively high expectations, with 77% pencilling in returns between 5-9%.

In contrast to investors’ high return expectations, generating income for clients was identified as the most important investment objective globally for the next 12 months

66%

Generating income for clients

57%

Capital preservation

55%

Generating high risk-adjusted returns

As a result, institutional investors are expecting to hold greater allocations to fixed income in 12 months, whilst having less exposure to equities

Equities (developed markets)

Equities (emerging markets)

Fixed income (developed markets)

Fixed income (emerging markets)

Private assets

Liquid alternatives

Cash

Multi-asset investments

Schroders commissioned CoreData to conduct the third 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 spectrum of institutions, including pension funds, insurance companies, sovereign wealth funds, endowments and foundations managing approximately $25.4 trillion in assets. The research was carried out in May 2019. The 650 institutional respondents were split as follows: 175 in North America, 250 in Europe, 175 in Asia-Pacific and 50 in Latin America. Respondents were sourced from 20 different locations.

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