A spokesperson for CoreData said risk assets include stocks, high-yield bonds, real estate and currencies.
Looking at the macroeconomic backdrop, more than three-fourths (77%) of institutional investors expect interest rates and inflation to remain at elevated levels over the next 12 months — thereby boosting the attractiveness of fixed-income investments.
Still, more than one-half (54%) of these institutional investors expect their actively managed equity strategies will deliver strong outperformance over the next year. However, this bout of confidence likely reflects expectations of modest equity returns. Only 35% have a bullish view on U.S. equities over the next three months, while 45% hold a bearish view.
Institutional investors are especially pessimistic about Chinese stocks – some 78% are bearish on Chinese equities over the next three months and only 10% are bullish.
In addition, a majority (71%) of institutional investors think tech stocks are overvalued and fear the emergence of a tech bubble.
Indeed, the tech-heavy Nasdaq100 index has surged 39.5% year to date through Nov. 6, compared with a 15.3% return by the S&P 500 index.
Investors are also concerned about a more catastrophic market event — nearly half (47%) think a tail-risk event is more likely than average in the next three months.
"These results show that 5% risk-free yields have completely changed the calculus for institutional investors," said Michael Morley, U.S. Research Director at CoreData in the report. "The trend of derisking portfolios and consolidating active investments with high conviction managers is likely to accelerate, putting a painful squeeze on the industry which is already faced with a low beta environment."
For this report, CoreData surveyed 100 U.S. institutional investors in September 2023 through an online survey.
