The latest Schroders’ Institutional Investor Study shows that most investors expect a global economic slowdown to impact returns, but also predict their allocations to private assets will continue to rise.
The global study spanned 650 institutional investors and found that 79% of investors believed a global economic slowdown would have the biggest impact on their portfolio performance over the next 12 months.
According to the report, the number of investors confident of securing their anticipated returns has “dropped significantly” from 52% in 2019 to 33% in 2020.
However, Schroders reported that investors will increase their allocations to private assets from 12.8% a year ago to 14.1% over the next 12 months. Half believed this would help manage risk.
The study said investors would increase allocations most to private equity, infrastructure equity and private debt over the next three years.
Some 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”.
The report also said that investors will consider performance track record, investment philosophy and fees as the three main factors when selecting a private assets specialist manager.
Johanna Kyrklund, Schroders’ Group chief investment officer, said: “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.”
Georg Wunderlin, Schroders’ global head of private assets, commented: “Historical crises have shown that portfolios with significant exposure to private markets achieve the best long-term investment performance.
“The Institutional Investor Study shows that investors continue to be attracted to private markets to increase diversification and access specialised, alternative return streams. These characteristics become especially valuable at times when the global outlook remains so unclear.”