Investors are optimistic for the remainder of 2024 and overwhelmingly expect the U.S. economy to experience a soft landing—either no recession or a mild one—in the wake of tightened interest rates, according to a survey of institutional investors conducted by Commonfund.
The asset manager’s annual survey collected responses from 203 institutional investors during the firm’s 26th annual Commonfund forum from March 10 through March 12. Those surveyed represented endowments, foundations, pension funds, operating charities, health care organizations, family offices and RIAs.
The surveyed investors were strongly optimistic (87%) about their ability to achieve their organization’s target returns over the next decade. More than half (55%) of those surveyed reported being “cautiously optimistic” about reaching their targeted returns; while another 32% reported being “very bullish” about returns, up about 10 percentage points from 2023. Another 13% reported “feeling nervous” about their investment prospects, down eight percentage points from last year.
Optimism Ahead
An overwhelming majority of respondents in the survey said they expect the U.S. Federal Reserve to maneuver to a soft landing, with 51% saying it is likely the Fed can deliver an economic soft landing, and another 27% saying they find it very likely. Meanwhile, 22% of respondents said achieving a soft landing is unlikely.
“The institutional investment community remains optimistic in Fed Chair [Jerome] Powell’s ability to engineer a soft landing in 2024, despite U.S. and global market uncertainty,” said Mark Anson, Commonfund’s CEO and CIO, in a report on the survey results.
Risks and Concerns
One of the biggest concerns among those surveyed was the economic impact of the upcoming U.S. elections, with 61% of investors including it among their top concerns. Other major concerns included inflation and interest rate adjustments (42%) and current wars and global conflicts (27%).
“With the impending U.S. election and ever-shifting geopolitical environment, this will be a pivotal year that investors are, understandably, closely watching,” Anson said in the report. “It is promising that investors increasingly anticipate about the same or even higher than average stock market returns, a continued trend upward since 2022.”
Investments and Returns
Half of those surveyed said they expect private equity will deliver the best total returns over the next 12 months; however, this is a 20% decline from last year’s survey, when more than 70% of respondents said PE would deliver the best returns. Respondents plan to increase their private equity allocations, with 45% saying they plan to increase allocations to the asset class. Investors are also bullish on private credit, with 27% of respondents saying they plan to increase their allocations to the asset class this year.
“Long-term investor confidence in alternative asset classes continues to grow, as this group predicts strong returns in the future,” Anson said. “It will be interesting to see how they perceive new investment opportunities, such as private credit and new technologies, like AI, in the years to come.”
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Tags: Commonfund, Commonfund Forum, institutional investors, Mark Anson, outlook, Survey