Institutional investors are confident they know how to manage risk, despite market swings, inflation and weaker returns, but many believe that traditional investing principles have outlived their usefulness.
In its second annual survey of more than 500 institutional investors, Natixis Global Asset Management found that because of the many challenges facing them, many institutional investors are exploring new investment strategies and currently favor global and emerging market stocks, real estate and private equity.
The survey found that two-thirds of institutional investors, including 85 percent in the U.S., are confident in their risk management approach, but 75 percent expect to be challenged by severe market swings, 64 percent expect rising inflation and 90 percent expect weaker market returns.
Nearly 90 percent believe they will meet their future obligations, but 70 percent globally and 81 percent in the U.S. say individuals saving for retirement will fall short.
More than 50 percent of institutional investors surveyed said they plan to add to their global equity holdings in 2013, followed by emerging market stocks. More than 70 percent say setting strategic asset allocation and taking tactical advantage of market movements is challenging.
Sixty percent said they plan to increase their allocations to alternatives and believe they will perform better in 2013 than they did last year.
Most say traditional investing principles have outlived their usefulness. Five years after the financial crisis upended markets, many institutional investors say the old rules of investing no longer apply. In the U.S., institutional investors (88 percent) feel strongly that traditional portfolio construction and diversification strategies aren’t ideal for most investors, and 60 percent of global institutions agree.
Additionally, more than 70 percent, including a high concentration of sovereign wealth funds, say that setting asset allocation and taking tactical advantage of market movements is difficult.
Natixis Global Asset Management is one of the largest asset managers in the world with $785 billion in assets under management.