Investors are now acutely concerned about the investment impact of a global economic slowdown amid falling confidence levels, as many are now turning to private assets to manage risk and diversify their portfolios, Schroders Institutional Investor Study 2020 has found.
The study – which spanned 650 institutional investors globally encompassing $25.9 trillion in assets – revealed that the vast majority of investors (79%) believed a global economic slowdown would have the biggest impact on their portfolio performance over the next 12 months.
Reflecting the current Covid-19 related concerns, this was a significant increase on 49% a year ago.
The number of investors who are confident of securing their anticipated returns has dropped significantly from 52% in 2019 to 33% in 2020.
At the same time, investors said they were ramping up their allocations to private assets from 12.8% a year ago to 14.1% over the next 12 months, with 46% stating that an increase in their allocation to private assets would help manage risk.
Private equity, infrastructure equity and private debt were cited by investors as the main three private asset classes to which they wanted to increase their allocations to over the next three years.
Indeed, 71% of investors said Covid-19 had prompted them to look for undervalued assets while 26% said they would continue to diversify into alternatives and private markets in a bid to reduce their exposure to listed assets.
Johanna Kyrklund, Schroders’ Group Chief Investment Officer, commented:
“Years of quantitative easing have borrowed returns from the future and Covid-19 has brought new uncertainties. Now, more than ever, is the time to remain focused on our underlying principles as active investors with an unrelenting focus on excellence and accountability.
“We believe that it is only with a truly active approach can we offer our investors the best possible opportunity to benefit from strong performance and navigate the ebbs and flows of today’s global investment markets.
“Staying the course, focusing on the long term and continuing to listen to our clients remain our primary focuses, irrespective of the often rapidly changing outlook.”