Commonfund: Investors still upbeat, but optimism is tempered

Institutional investors' expectations are positive for 2014, although overall sentiment is not as optimistic as last year, a new survey by Commonfund found.

Investors expect to see their assets grow by a median 7% over the next year, with a 6.5% average gain forecast for the S&P 500 index, according to the 2014 Commonfund Investor Outlook Survey.

Last year, investors had a median forecast return for investments of 8%. In this year's survey, investors expect their assets to grow by a median 8% annually in the next five years.

“I think any time you come out of a 32% return from the S&P 500 (in 2013), I think everyone realized markets don't go up in straight lines,” said Keith Luke, president of Commonfund Securities, Commonfund's broker-dealer subsidiary, in a telephone interview. “There was a very positive outlook from our audience, very positive, specifically to the U.S. economy.”

Fears regarding a European Union crisis, as well as a budget or debt impasse in Washington are significantly lower than last year.

Only 25% of respondents cited the EU crisis as an elevated concern this year, compared with 55% last year. As a result, sentiment for European equities is up from last year's survey, with 29% of respondents stating they plan to increase their exposure to the asset class in the next 12 to 18 months, up from 18% of respondents last year.

“If you look back a year ago, people were concerned about the debt limit and dysfunction in Washington; while everyone is clearly frustrated with dysfunction in Washington, participants did not see that as much of an impediment in growth,” Mr. Luke said.

Only 37% of respondents cited Washington gridlock as an elevated concern for 2014, compared with 62% in last year's survey.

While 42% of respondents said they plan to increase their exposure to emerging markets equities; that number is down from 55% in last year's survey.

The survey polled 200 attendees at the 2014 Commonfund Forum on March 8-11 in Hollywood, Fla. The attendees represent non-profit institutional investors and pension funds with combined assets of about $163 billion.