(April 9, 2012) — Institutional investors burned by the latest round of the financial crisis are going to be more conservative with their investment strategies, fund managers have told consulting firm Towers Watson.
Some 40% of fund managers responding to the survey said they believed their clients would be ‘modestly more conservative’ in their investment strategy, the highest percentage answering this way since 2010, when 49% agreed with the statement.
The survey said: “In response to the recent elevation of financial risks and the poor prospects for many asset classes, institutional investors are expected to revert to more conservative strategies. Asset allocation has always been a top factor for investment success, and because of the euro crisis, risk control has regained managers’ attention.”
Last year, before the latest round of debt crises in the Eurozone, half of all responding fund managers predicted their clients would take a more aggressive approach to investing. The highest prediction of risk aversion came in 2009 when 22% of fund managers said their clients would be ‘substantially more conservative’. This year, 5% of these managers agreed with this statement, the second highest percentage in the four years the survey has been conducted.
Additionally, fund managers predicted their clients would demand more from them in terms of performance.
The survey said: “The task of delivering superior returns has been difficult in the past several years, but many managers expect that institutional clients will demand good performance, along with renewed sensitivity to risks.”
The survey showed the highest number of fund managers this year (46%) said their clients would be raising concerns about their investment performance – out of a range of choices including risk, management fees and asset allocation. This was also the highest number of fund managers predicting this concern since the survey began in 2009.
Asset/liability matching would be one of investors’ least concerns this year, fund managers said.