Institutional investors are betting on stocks for performance next year, but they say they will stick with more conservative investments rather than taking risks, according to a Natixis survey released Monday.
In the long run, institutional investors feel they can earn 6.9 percent after inflation next year, but they are betting on income-producing investments over riskier assets, according to the survey by Natixis Global Asset Management.
Forty-six percent of institutional investors say stocks will be the leading investment category in 2015, while 28 percent identify alternative assets as the top performers next year, with private equity leading the way in that category. The survey included 642 senior institutional investors.
Over the next 12 months, institutional investors will make adjustments in their portfolios to maintain or increase allocations to income-generating investments, such as dividend-paying stocks (93 percent), real estate (87 percent) and illiquid investments (73 percent), says Natixis.
Although they want to achieve growth, only 16 percent of the investors say they will increase their current level of risk next year. They feel meeting their goals may be challenging, with geopolitical events, European economic problems, slower growth in China and rising interest rates being the biggest threats.
A large majority of institutional investors (81 percent) believe it will be difficult to mitigate the impact of market volatility in the coming three years, and 77 percent are concerned about their ability to manage tail risk, the survey says.
Institutional managers say individual investors should avoid making emotional decisions about finances, use alternative investing strategies such as hedge funds, long-short funds and other options, set a return target based on personal goals rather than market benchmarks, and think about risk first, rather than return, when putting together a portfolio.
“Institutional investors have an enormous fiduciary responsibility to fund current goals and meet future obligations,” says John Hailer, president and CEO of Natixis Global Asset Management in the Americas and Asia. “Building a durable portfolio with the proper risk management strategies can help investors strike a balance between pursuing long-term growth and minimizing losses from volatility.”