A survey conducted by PineBridge Investments on over 170 UK-based institutional investors and asset managers, has found out that geopolitical risk remains the biggest short to medium term risk to global economy according to pension professionals.
Some 55% of the pension professionals surveyed ranked geopolitical risk before inflation (20%), growth rates (16%) and central bank policy (7%).
If asset managers interviewed by PineBridge also placed geopolitical risk as the main threat to global economy (54%), they expressed more concerns about central bank policies as a risk to the global economy (25% of the managers surveyed), ahead of inflation (11%) and growth rates (5%).
Another finding of the survey highlighted differences in asset classes expectations. In the view of pension professionals, global equities are set to be the best performing asset class (22%) followed by emerging market equities (17%) and alternatives such as hedge funds and private equity (15%), whereas asset managers’s top three was emerging markets as a whole (31%), multi-asset credit (31%) and asset backed securities (13%).
The survey also suggested that pension professionals and investment consultants consider the belief in a manager’s investment strategy / philosophy as more important (55%) than investment performance (32%), while a smaller set of respondents cited the most important factor as brand name (4%) and commitment to diversity and/or sustainability (8).
Steve Cook (pictured), co-head of Emerging Markets Fixed Income at PineBridge Investments said: “The results surprised me, as I believe geopolitical risk is currently quite low by recent standards. Presumably, respondents are nervous with regard to Korea, Iran, and other potential flashpoints”
“It is likewise interesting that pension fund professionals are far more sanguine about the risk posed by central bank policy to the global economy than asset managers. In my opinion, the biggest risk to the global economy is ‘central bank policy’ given that the huge stimulus measures that followed the financial crisis are gradually being wound down.”
Hani Redha, portfolio manager, global multi-asset at PineBridge Investments commented: “The vast majority of pension professionals said their primary reason for choosing an asset manager is a belief in the manager’s investment strategy /philosophy. It’s a positive stance because ultimately they are backing and buying the manager’s approach. Performance, by contrast, can be skewed and needs to be scrutinised over the long term to yield meaningful signals. Short-term performance can tell you very little.”
To access the full survey, click here.