Chief investment officers of U.S. public funds, corporations, endowments and foundations surveyed by Morgan Stanley Investment Management remain unsure about the prospects for returns on their investments in 2010.
The CIOs reported an average confidence level of 7.6 on a scale of -100 (not confident) to 100 (totally confident).
“Responses to our survey, however, were far from monolithic,” according to a report that accompanied the study results. “In fact, we saw a wide gradation in the level of confidence among the multiple constituents of the institutional investing community, with the index scoring a moderately bullish 20.0 among corporates, a more restrained 10.6 among publics, and a decidedly more bearish -9.4 among endowments and foundations.”
Fixed income is expected to be the main driver of positive investment performance over the next 12 months, the CIOs said, identifying high-yield and investment-grade corporate fixed income as the top two performers.
Two-thirds of CIOs plan to keep fixed income at current levels, and 80% plan to keep their cash allocation steady in 2010.
Although they named U.S. equities as their third top pick for performance in 2010, more than 30% of CIOs plan to reduce allocations to U.S. equities over the next 12 months. The same percentage plans to reduce non-U.S. equities over the same time period.
“These expected changes in asset allocations — which suggest a degree of continuity with established portfolio strategies, as opposed to any fundamental restructuring — appear to be in keeping with the essentially neutral outlook reflected in the current score of 7.6 on the CIO Confidence Index,” according to the report. “That same neutral sentiment can be seen in CIOs' projections for the U.S. economy at large. While the CIOs' predictions of U.S. GDP growth of 2.8% for the next 12 months can be seen as a bullish expectation at this point in the economic cycle, the CIOs participating in the index expressed concerns about a host of risks that could jeopardize the recovery in the global economy and financial markets in the next year.”
The survey, conducted with Greenwich Associates, was done during the six-week period ending Nov. 1, with 50 CIOs of U.S.-based public funds, corporations, endowments and foundations, representing an aggregate $548.8 billion in assets.