(February 13, 2014) — European institutional investors are putting their faith in equity markets both this year and in the long-term, reassured by their stellar performance last year, according to research.
Almost half the investors responding to a survey by data specialist Pension Mandate said equity would be the best performing asset class in 2014. This 46% were confident the asset class could continue to perform after rallies in 2013. Alternative investments came in second at 34%, some 20 percentage points higher than last year. Investors had the least confidence in fixed income, with only 7% vouching for its success.
Long-term, even more investors—58%—found equities to be the best performing asset class, with alternatives following at 26%. Only 5% of investors said bonds would outperform other asset classes.
Pension Mandate surveyed European pension funds and other institutional investors with combined assets of €162 billion.
According to the firm’s report, 28% of investors expected emerging markets to perform the best in 2014. Almost a quarter of those surveyed also found promise in frontier markets while 15% said North America would be the best performing region. Japan lagged behind with only 5% of investors believing it would outperform others.
North American investments pulled through in the long-term though, with 28% of investors expecting them to be the best performing on a regional basis. This figure is up from 14% in 2013. However, emerging markets remained the best long-term destination, earning the faith of half of the surveyed investors.
An increasing number of investors—40%, compared to 25% in 2013—said they planned to change their asset allocation in 2014 due to changing economic conditions. About half of these investors said they would consider adding alternatives to their portfolios, and 20% said they would add absolute return strategies. These potential additions are higher than those reported in 2013: only 14% had said they would increase in alternatives and another 14% said they would add absolute return.
Despite high expectations for equities in both 2014 and the long-term, only 10% of investors said they would add more equities to their portfolio. The total asset allocation for those surveyed revealed a 47.59% exposure to equities.
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