(October 8, 2013) — Institutional investors are increasingly strengthening their risk controls and broadening their investment universes, a Schroders survey has found.
Over 150 investors and consultants participated during the annual Schroders UK Institutional Conference last month.
Fixed income investors were particularly concerned with the ongoing bond market volatility, with 70% of respondents reporting their funds would likely accept the volatility. The survey also found a little more than half would likely move to a LIBOR plus approach.
To adapt to the challenges of such volatile markets, investors are looking to broaden their bond allocations within their fixed income portfolio—55% said it was likely and 15% said it was highly likely that such broadening would occur, according to the survey.
“This shows willingness from our clients to evolve their investment strategies for the challenges ahead,” Neil Walton, head of Schroders’ UK institutional business development group, said.
However, only 53% of investors said they would consider unconstrained fixed income investing in the future, Schroders said.
Exposure to emerging markets was a hot topic for investors as well.
The volatility of the markets pushed 56% of surveyed investors to make changes to their allocations to emerging market equities or debt in the medium term. The survey found that 24% did not expect to make any changes.
Looking at pension allocation, Schroders found only 13% of investors expected to increase their equities holdings over the next six months, despite a strong global economy this year.
More than a third of those surveyed said they would not be increasing their equities allocations in the short term.
However, Schroders reported that a whopping 92% of investors would consider allocating more to equities and growth assets within “a risk control framework to limit potential downside.”
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