investment strategies for the world's largest institutional investors
The results of the CIO Sentiment Survey broken down into investment impact and themes
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Public equities, and in particular US equities, have been one of the biggest return drivers of multi-assets portfolio in recent memory but asset owners are increasingly wary about their high valuations. Close to half (47 per cent) of asset owners cited equity risk as the biggest risk to their portfolios in the year ahead.
While interest rates are falling in major markets, inflation risk is back on the watch list as CIOs are cautious about potential fallouts from uncertain trade and immigration policies. Seventeen per cent of respondents are worried about inflation, compared to 9 per cent last year.
“As the world balkanises more, trade decreases and global flows decrease. It just becomes a more expensive environment from the ground up. In the US, you're seeing it already from a lot of more expensive imports,” Skriba said.
To combat the headwinds caused by inflation, more than half (53 per cent) of CIOs said they are investing in private markets with inflation-proof characteristics, which corresponds to the significant interest in infrastructure and other real assets. Around 33 per cent said they are adjusting the duration of their fixed income allocation, while 28 per cent said they are adding more floating rate exposure.
Respondents are least worried about climate risk and credit risk.
CIOs most concerned about equity risk are reducing their active and passive allocations.
Planned Net Allocation Change*
% of respondents, 2024
What is the biggest risk to your portfolio in the year ahead
% of respondents, 2022-2024
As for operational risks, this year’s survey revealed that asset owners are grappling with a new top challenge in the investment team’s day-to-day operations – external stakeholder pressure. Half of respondents cited it as one of their top three team challenges.
It speaks to worries around the world that the pension sector is increasingly politicised. Governments are keen to mobilise as much as capital as they can to contribute to national priorities to relieve budget pressures. For example, in UK and Australia, funds are encouraged to invest domestically or to support strategic projects such as energy transition infrastructure.
But some cases could see politicians exert more direct influence over an institution as exemplified by Canada’s Alberta Investment Management Corporation, whose entire board was ousted by Alberta government and is now under immense pressure to cut fund costs.
Another aspect of external stakeholder concern is that asset owners are expecting to see a lot more demand for funding materialise in the coming years, Skriba said. “I think that’s why we had some consensual information about changing demographics and pressure on pension type of funds globally,” he said.
please select the top three challenges that have the most significant impact on your team.
% of respondents, 2023, 2024 & 2025
2024 CIO SENTIMENT SURVEY