(March 18, 2013) – The 217 institutional investors surveyed earlier this month at Commonfund’s annual conference were, overall, a pretty cheery group.
The attendees, who together represent $123 billion of nonprofit and pension assets, expected their portfolios to grow an average of 7.6% this year, versus 2012’s projected 7.4%.
Commonfund surveyed the participants at its conference in Hollywood, California, between February 18 and March 8.
The group also forecasted an average gain of 7.9% on the S&P 500 for the year. Over three years, the group projected a more modest 7.1% climb.
Emerging markets hold even more promise, the investors felt, with 78% expecting the MSCI Emerging Markets index to outperform the S&P 500 over the next three years. That figure is up slightly from the 75% reported during last year’s conference.
Given the optimism towards non-western markets, the survey unsurprisingly revealed widespread plans to boost emerging market allocations over the next year to year-and-a-half. More than half (55%) of those surveyed expect to enlarge their emerging market portfolio, making it the most popular asset class. Venture capital/private equity came in second place, with 47% (up from 40% in 2012) planning to increase exposure.
The least popular asset class—the one that the most investors plan to pull money from—is another non-surprise: US Treasuries. In total, 52% of respondents said they plan to shrink their allocations, compared with just 2% who intend to add exposure.
“Institutional expectations for the markets and select asset allocations such as emerging markets indicate that participants continue to be net positive about 2013 reflecting a sense of stability in the US and abroad,” said Verne Sedlacek, Commonfund’s president and CEO. “The data shows that overall concerns about downside risk has been reduced since last year, although respondents are still very worried about achieving their investment return goals.”
Worried, yes. But less worried than last year: 62% of respondents felt tail risk is either declining or holding steady, versus 54% in 2012. Political gridlock in US debt came in as the top reason to fret in 2013, with 38% citing it as the foremost source of tail risk. Just 23% said that last year.
The Eurozone crisis is less of a cause for concern than 12 months ago, although these results predate the saver-bankrolled bailout of Cyprus.