Geopolitical risk was high up on the worry list for institutional investors at the beginning ofthis year, and as the year winds down toward its close, once againit has raised its head to haunt the pros in a survey of pension professionals, consultants and asset managers.

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But the source of concern may have changed.

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According to a report in Investment & Pensions Europe,while the sources of worry may be a tad different, the fearsthemselves aren’t.

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Elections to be held later in the year, in France (April/May),the Netherlands (March) and Germany (September), meant that surveyrespondent investors at the beginning of 2017 focused theirattention there to see how voting would play out, lest politicalunrest raise its head.

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But fears seemed to recede as populist, anti-immigrationcandidates were defeated, the report says, only to resurface in newguises.

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However, a survey carried out by Allianz Global Investors duringApril and May also found that geopolitics was the number oneconcern for institutional investors, even more than fear of risinginterest rates or an economic slowdown.

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And now that the year is drawing to a close, that worry is onthe increase.

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The most recent survey, carried out by multiasset managerPineBridge Investments, found that asset managers rankedgeopolitics as the biggest risk, but were also concerned aboutcentral bank policy (25 percent) and inflation (11 percent).

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Among pension professionals and consultants, a fifthof respondents were more worried about inflation, while 16 percentranked growth rates as the biggest risk and 7 percent were mostconcerned about central bank policy.

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Steve Cook, co-head of emerging markets fixed income atPineBridge Investments, is quoted saying in the report, “Theresults surprised me, as I believe geopolitical risk is currentlyquite low by recent standards. Presumably, respondents are nervouswith regard to Korea, Iran, and other potential flashpoints.” And,of course, there’s Brexit to worry about, as well as the recentfailure of coalition talks in Germany, which is giving manyinstitutional investors concern.

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Of the 755 investors surveyed from across North America, Europeand Asia, 44 percent, the report said, identified geopolitics asrepresenting a major risk to investment performance. More than 90percent saw event risk as a threat, compared with three-quartersthe year before.

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Respondents were also asked about passive vs. activeinvestments. A 40–60 percent passive to 40–60 percent active ratiowas the most common balance (25 percent); that was followed by a20–40 percent passive/60–80 percent active split (17 percent).

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Just over a fifth (22 percent) of respondents to PineBridge’ssurvey expected global equities to perform best over the next 12months, and 17 percent backed emerging market equities.

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