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Institutional Investor Study

Geopolitics and investor expectations

Schroders’ third annual Institutional Investor Study analyses the investment perspectives of 650 institutional investors, of which 156 respondents were from insurance companies. These insurance companies are collectively responsible for $9.8 trillion in assets and were sourced from 20 different countries.

The Study provides a snapshot of insurers’ key areas of focus and concern including the macroeconomic and geopolitical climate, return expectations, asset allocation and attitudes to private assets and sustainable investing.

Three 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. 31% in 2017.

56%

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

78%

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

Insurance companies believe geopolitical turbulence will have a significant influence on a portfolio’s investment performance for the next 12 months

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Geopolitical turbulence

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Higher interest rates

Higher interest rates is considered the most influential on portfolio performance this year but its importance has declined since 2017

62% of insurance companies expect annual total return expectations above 5% over the next five years

Above 10% return

5-9% return

1-4% return

Yet confidence in achieving return expectations has dropped since 2017 reflecting a more uncertain macroeconomic climate

61%

2017

54%

2018

51%

2019

Despite this expectation for high returns, generating income was identified as the most important investment objective globally for the next 12 months

Generating income

Funding liabilities

Meeting cashflow requirements

2019
2018
2017

Insurers are reaching out for customised solutions to meet their investment objectives

70%

Insurers say their organisation is comfortable adopting new financial instruments or asset classes

55%

Insurers state Liability Driven Investment (LDI) is crucial to managing their investments

The need for solutions is being driven by an increased appetite for risk management strategies

  • 2019
  • 2018
  • 2017
  • Diversifying across asset classes & geographies
  • Increasing allocations to fixed income
  • Increasing use of alternative investments
  • Risk budgeting
  • Currency hedging
  • Derivatives
  • Managed volatility strategies
  • 83%
  • 66%
  • 58%
  • 52%
  • 51%
  • 44%
  • 31%
  • 79%
  • 50%
  • 54%
  • 44%
  • 46%
  • 41%
  • 31%
  • 88%
  • 65%
  • 53%
  • 30%
  • 43%
  • 52%
  • 30%

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. 156 insurance investors, representing a total of $9.8 trillion in assets under management, were taken from a broader pool of 650 institutional investors with approximately $25.4 trillion in assets across North America, Europe, Latina America and Asia-Pacific. Respondents were sourced from 20 different countries.

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