Schroders survey reveals an appetite for a broader investment universe
Seeking returns across a multi-speed world was the theme of the annual Schroders UK Institutional Conference held at the British Museum in London last month.
Over 150 attendees including pension fund clients and consultants were given insight into the current thinking of key Schroders’ investors and chief economist.
Setting the scene for the conference and its varied agenda was Miles O’Connor, head of Pan European institutional distribution. He introduced Schroders’ guest speakers: Peter Harrison, global head of equities, who presented on delivering returns in the developed world; Philippe Lespinard, co-head of fixed income, who provided insight into the expanded fixed income horizon; Virginie Maisonneuve, head of global and international equities, who delivered a round the world tour highlighting investment opportunities in global markets; and Keith Wade, chief economist, who provided insight into growth’s change of direction from West to East.
Neil Walton, head of the UK institutional business development group, says: “This year’s results have been particularly interesting, over 90 per cent of attendees surveyed at our annual conference said that they would consider an increase in equities/growth assets if they are wrapped into a risk control framework to limit the potential downside.
“Alongside this, 70 per cent of our guests said that they were likely to broaden the investment universe of bonds within the fixed income portfolio. This shows willingness from our clients to evolve their investment strategies for the challenges ahead.”
Attendees were asked to provide insight into the current issues and challenges that influence their investment decisions. The findings were as follows:
As volatility becomes an on-going challenge for fixed income investors, attendees were asked:
• How likely it is that your fund will accept the bond market volatility?
Over 70 per cent of respondents said that is likely or highly likely that their fund would accept the volatility, just below 30 per cent said it was not likely at all.
• How likely is it this your fund will move to a LIBOR plus approach?
Fifty four per cent said it was likely or highly likely that they would move to this approach. Forty six per cent said that it was not likely at all.
• How likely is it that your fund will move to broaden the investment universe of bonds that the fund holds?
Fifty five per cent said it was likely and 15 per cent said it was highly likely that their fund would broaden its investment universe with 30 per cent replying that it was not likely at all.
• In the current environment will you consider looking to global and more unconstrained fixed income investing in the future?
Views were mixed on this as 53 per cent and yes they would consider unconstrained fixed income investing in the future with 48 per cent said they would not consider this.
Looking specifically at emerging markets, attendees were asked:
• Do you expect your fund to increase or decrease its exposure to emerging markets (equities or debt) in the medium term?
Fifty six per cent said it was a possibility, 21 per cent said yes they would expect changes to the exposure in emerging markets, however 24 per cent said they would not expect any changes in the medium term.
Looking at pension allocation, attendees were asked:
• With the global economy performing better than expected this year, will your pension scheme look to increase its allocation to equities in the next six months?
Thirteen per cent said they would look to increase allocation to equities, 50 per cent said they would consider it and 37 per cent said that would not be looking to increase their allocation to equities in the short term.
• Would an increase in equities/growth assets be more palatable if these exposures where wrapped in a risk control framework to limit potential downside?
Some 92 per cent said yes or that they would consider an increase in equities/growth with downside protection, with only eight per cent replying that they would not consider this.
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