Equity and bond markets both showed strong annual returns as 2023 drew to a close, with both showing their strongest growth since the beginning of the pandemic. With markets returning to positive territory, asset owners began to feel more confident in meeting their targets, with 57 per cent of respondents confident in this regard compared to 36 per cent last year. 

With more room to move, they showed greater willingness to make substantive allocation changes. At 47 per cent, the proportion of CIOs making allocation changes has returned to 2021 levels.

Responses on equity and fixed income allocations were too varied to point to a broad-based upward or downward trend in these asset classes overall, but significant changes were taking place under the hood.

Respondents who were concerned about equity valuations were drawing down from active positions. When asked what allocation shifts they planned to implement in their portfolios in the year ahead, one of the largest planned increases was in passive equity, alongside similar decreases in active equity, reflecting concerns about over-valuation.

There were also significant planned increases in active core and core + fixed income and active high yield fixed income to take advantage of elevated yields.