Only 56% of investors are happy with their overall performance this year, according to results of a biennial survey of global asset owners conducted by independent London-based investment consultant bfinance, compared with 82% in the summer of 2022.
The survey, released on Monday, also found that some 63% are satisfied with the performance of their active portfolio managers.
In addition, an overwhelming majority (87%) of surveyed asset owners said they are worried that inflation and rising interest rates will hurt their ability to achieve their investment objectives amid fears of a recession. However, only 43% of investors have made recent changes — or soon plan to make changes — that would increase the inflation-sensitivity of their portfolios. Moreover, only 17% expect to make such portfolio adjustments in the next 18 months.
The survey, conducted in September, comprised 396 senior investors across 40 countries whose institutions are responsible for more than $13 trillion in assets, a release issued in conjunction with the survey noted.
With respect to climate concerns, 32% of respondents said they are reducing their portfolio carbon emissions, while another 34% are planning to do so. About one-third of respondents said they would be "unlikely" to hire managers who have not made a commitment to net-zero.
Amid the upheaval of this year's global economies, more investors are migrating toward private markets in their asset allocations – some 52% of investors expect these exposures to increase over the next 18 months, while about 28% expect to reduce their exposure to equities.
"There is now no doubt that we are in a period of secular macroeconomic transition," Kathryn Saklatvala, head of investment content at bfinance, stated in the release. "Institutional investors are evidently concerned about inflation and rising rates, but the looming threat of recession and the steep decline in public markets this year makes the prospective choices very difficult indeed. The investment strategies that may provide the greatest resilience in a climate of inflation and rising rates may also be more vulnerable in a climate of recession and higher defaults, and vice versa."
The survey also revealed that 20% of investors will likely shift toward active management in the next 18 months, while 14% will move the other way over that span, toward passive investment.
Over the previous 18 months, 16% of investors said they had moved toward active management, while 13% moved toward passive.
The movement toward active management has been "most evident" among insurers and endowments/foundations, the survey indicated.
Moreover, the number of investors that have exposure to cryptocurrencies is expected to climb from 8% currently to 21% in five years. But this move toward crypto varied widely by region – for example, 57% of U.S.-based investors expect to have some exposure in this asset class within five years, vs. only 11% of investors in the U.K.
About one-third (33%) of respondents expect their portfolios to become less liquid over the next 18 months, while only 12% expect their holdings to become more liquid over that time span.
The report also revealed that over the past three years, 30% of respondents have outsourced — that is, shifted a greater proportion of assets toward external asset managers. However, despite this increased use of external management, asset owners' in-house management teams are becoming larger. Indeed, some 48% of investors have increased the number of investment staff in their in-house team over the past three years.
