December 2022
New research from 100+ leading institutional investors into the current market outlook and its impact on portfolio allocations.
- 63% identified inflation as the key portfolio risk
- 66% expect to increase their allocation to hedge funds
- 80% are looking to increase their budget for data and tech infrastructure
- 69% plan to increase the level of assets managed in-house
SigTech conducted a global survey1 of institutional investors from the US, Europe and Asia with around $2.1 trillion in assets under management collectively. The report provides an understanding of their current market outlook and its implications for their portfolios.
Market outlook and changes to portfolio allocations
Despite the gloomier market sentiment and deteriorating macroeconomic environment, investors remain bullish about their ability to navigate the financial markets.
75% of the institutional investors surveyed expect to generate stronger returns over the next two years compared with the past decade.
In terms of relative performance, the strongest conviction among investors is that value stocks will outperform growth stocks. Investors also expect the US stock market to lose its market leadership.
Focus on risk
Risk has again emerged as a central consideration for investors. Inflation is seen as potentially having the biggest impact with 63% citing it as the primary risk followed by rising interest rates at 51%.
Hedge fund allocations set to rise
Our survey shows that two thirds of investors expect to increase their allocation to hedge funds over the next two years. Specific hedge fund strategies that investors expect to allocate to are credit strategies cited by 40% followed by managed futures (32%) and multi strategy (31%).
Quantification transforming investment processes
Nine out of ten institutional investors believe that in order to achieve above-average returns in the future, accessing high quality data and having technological capabilities to process it efficiently will be key.
Internalization trend gaining traction
Institutional investors are increasingly looking for customized investment solutions as opposed to ‘one-size-fits-all’ products. 69% surveyed said they are looking to increase the level of assets managed in-house over the next three years.
Institutional investors face a fast-changing and uncertain world. Yet, within the industry there is a strong desire to improve on the status quo by embracing new investment ideas and technological innovations to make operating models more efficient and ultimately improve investment results.
Citations:
[1] SigTech commissioned the market research company Researchscape to survey 119 institutional investors across the US, Europe, and Asia. Interviews were conducted online between October 28 – November 12, 2022.
Disclaimer
This content is not, and should not be construed as financial advice or an invitation to purchase financial products. It is provided for information purposes only and is subject to the terms and conditions of our disclaimer which can be accessed here.
