Fears that a global economic slowdown will affect investment performance have almost doubled since last year, driven by the Covid-19 pandemic.
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
Tapering of monetary policy
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.
The Covid-19 pandemic will cause a major global recession
The Covid-19 stock plunge presents a good buying opportunity
We will not make any portfolio changes until the outlook is clearer
The liquidity provided by central banks does not help us to manage the downside risks caused by a pandemic
We have diversified into alternatives, real assets and private market assets to reduce the impact of market volatility caused by Covid-19
Fiscal and monetary policy can do little to help mitigate the impact of the outbreak
expect annual total returns of 5-9%
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.
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
The need for certainty is also seen in risk management strategies where diversification and tactical asset allocation are cited as the top strategies.
Diversifying across asset classes & geographies
Tactical or dynamic asset allocation*
Increasing use of private assets
Increasing allocations to fixed income
*2018 and 2019 data for tactical or dynamic asset allocation is not available.
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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 US$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.