Institutional Investors Remain Optimistic for 2024

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

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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.”

Institutional Investors Seek Low-Risk Assets, More Diversified Portfolios

How Institutional Investors Are Thinking About Alts

Tags: Commonfund, Commonfund Forum, institutional investors, Mark Anson, outlook, Survey

IT technology company Unisys Corp. announced Monday it has closed an agreement with F&G Annuities & Life Inc. to purchase group annuity contracts. The agreement, which closed on March 28, will see Unisys transfer $200 million in pension liabilities from its U.S. defined benefit plan to the insurer.

F&G will assume responsibility for paying out pension benefits to 3,800 Unisys retirees and beneficiaries. Notably, this is the sixth Unisys pension risk transfer transaction since January 2021, and it has contracted with F&G for three of the four that involve U.S. participants.

In November 2023, the company completed a $250 million PRT for 3,900 U.S. retirees, also with F&G. In March 2023, the company transferred $265 million in U.S. plan liabilities to F&G. In January 2021, the company conducted a PRT with MassMutual for $280 million.

Globally, Unisys has offloaded nearly $2 billion in pension assets since January 2021, including those from subsidiaries’ pension plans in the Netherlands and Switzerland.

According to Unisys’ most recent 10-K, the company’s U.S. defined benefit plan had $1.8 billion in pension assets and $2.2 billion in pension liabilities as of year-end 2023. The company’s international plans had $1.5 billion in assets and $1.7 billion in liabilities at the end of 2023.

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The Unisys deal continues the trend toward PRT transactions, following record years in 2022 and 2023. In March, Verizon completed a $5.9 billion PRT with Prudential and RGA Insurance. In February, Shell completed a $4.9 billion PRT transaction with Prudential.