Funding pressures are pushing institutional investors to allocate increasing chunks of their portfolios to developed markets and emerging markets equities, despite expectations of a market correction in the near term.
New research by State Street Global Advisors found that pressure to perform is leading to contradictions in the way investors behave. The research said 63% of investors across the globe have increased their allocations to developed markets equities over the past six months, and 48% have increased investment in emerging markets equities over the same period.
However, that contradicts with the responses of 60% of investors in the research who expect a negative equity market correlation of between 10% and 20% in both developed and emerging equity markets in the near term.
Of those that have increased allocation to equities, 65% said funding pressures were the primary reason for the change.
Rising geopolitical risk was cited as a major concern, as well as the slowdown in emerging markets, leading to a belief by 44% of respondents that the market is overvalued, and that a correction is already overdue.
Research was conducted in January across 420 investors in 13 countries, including Europe, Asia and the U.S.