Institutional investors forecast gloomy 2014: AMP
Institutional investors are assessing their options after reining in their return expectations in 2014 despite above forecast performances last year, the AMP Capital Institutional Investor Report reveals.
The report found that institutional investors, who manage a collective US$2.4 trillion, saw returns averaging 13 per cent in 2013, but predicted average returns of 7.3 per cent in the year ahead due to a variety of global economic issues.
AMP Capital Chief Executive International and Head of Global Clients, Anthony Fasso, described 2013 as a "stellar year" due to the bull market in equities around the world.
"Of those we surveyed, 93 per cent either met or exceeded their expectations. Allocations to domestic and international equities served investors well, with developed market equities performing better than those in emerging markets.
"However, investors' planned allocation increases for the rest of 2014 are most pronounced in alternative assets especially in private equity and direct real estate and infrastructure
"Looking ahead, investors have uncertain expectations. Their concerns are based around the risks they see to the global economy including the ongoing crisis in Ukraine, the end of quantitative easing by central banks and questions over the future direction of China's economy.
"Despite this, the majority of investors surveyed expect to make no substantive change in their approach to seeking returns either through alpha strategies or by bearing more risk."
The survey found that 45 per cent of respondents expected to boost their holdings in private equity during the first half of 2014, more than a third (36 per cent) anticipate an increase in their allocation to direct real estate and almost a quarter (24 per cent) plan to boost their investment in direct infrastructure.
However, even though institutional investors reported plans to increase allocations to alternative assets, the rise may be tempered as pension schemes, in particular, that are preparing to enter their drawdown phase may find themselves up against their governance limits for investing in illiquid assets.
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