{"id":38906,"date":"2014-12-16T07:28:53","date_gmt":"2014-12-16T06:28:53","guid":{"rendered":"http:\/\/beta.next-finance.net\/note\/institutional-investors-under-pressure-to-balance-short-term-market-moves-and-long-term-mandates-finds-natixis-global-asset-management\/"},"modified":"2014-12-16T07:28:53","modified_gmt":"2014-12-16T06:28:53","slug":"institutional-investors-under-pressure-to-balance-short-term-market-moves-and-long-term-mandates-finds-natixis-global-asset-management","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/note\/institutional-investors-under-pressure-to-balance-short-term-market-moves-and-long-term-mandates-finds-natixis-global-asset-management\/","title":{"rendered":"Institutional investors under pressure to balance short-term market moves and long-term mandates, finds Natixis Global Asset Management"},"content":{"rendered":"<p>Pension funds and other institutional investors believe they will meet their long-term<br \/>\nobjectives, but they expect it will be difficult to earn stable short-term returns and<br \/>\nmanage liabilities tied to the extended lifespans of their beneficiaries, according to survey<br \/>\nfindings released today by Natixis Global Asset Management. Citing pressure to focus on<br \/>\nshort-term performance and their obligation to balance asset growth and protection,<br \/>\ninvestors are cautiously pursuing innovative ways of generating income and alpha.<\/p>\n<p>The Natixis global survey of 642 institutional investors, including public and corporate<br \/>\npension funds, sovereign wealth funds and insurers collectively managing $31 trillion in<br \/>\nassets, explores current market outlook and strategies in portfolio construction, risk<br \/>\nmanagement and operations.<\/p>\n<p>While institutional investors are optimistic about equities in 2015, their outlook is<br \/>\ntempered by market risks beyond their control and unknown liability risks ahead,<br \/>\nparticularly those linked to increased longevity. Despite their need for asset growth,<br \/>\ninstitutional investors are twice as likely to reduce portfolio risk as to increase it in the<br \/>\nnext 12 months. And even with the use of liability-driven investing strategies, the biggest<br \/>\nchallenge is their ability to generate sufficient returns.<\/p>\n<p>Key findings of the survey include:<\/p>\n<ul>\n<li> While 87 percent expect to meet their long-term liabilities, more than half of the<br \/>\nrespondents believe most other organizations will fail to do so (consistent with results<br \/>\nfrom last year\u2019s survey).<\/li>\n<li> 80 percent of institutions say it is challenging to generate stable returns in the short<br \/>\nterm, while 60 percent of investors expect it will be difficult to fund their long-term<br \/>\nliabilities.<\/li>\n<li> 60 percent of investors responded that the industry has not been innovative enough in<br \/>\ndeveloping liability-driven investment (LDI) solutions to meet current and future costs.<\/li>\n<li> On average, institutions expect they can achieve yearly returns of 6.9 percent after<br \/>\ninflation.<\/li>\n<li> 81 percent of institutional investors believe it will be difficult to mitigate the impact of<br \/>\nvolatility, and more than three-quarters (77%) are concerned about their ability to<br \/>\nmanage tail risk.<\/li>\n<li> The top four potential threats to investment performance in the next year are<br \/>\ngeopolitical events, European economic problems, slower growth in China and rising<br \/>\ninterest rates.<\/li>\n<\/ul>\n<p><em>\u201cInstitutional investors, particularly pension funds, have a lot at stake as the portfolios<br \/>\nthey manage today are an important source of tomorrow\u2019s income for the world\u2019s aging<br \/>\npopulation,\u201d<\/em> said John Hailer, president and chief executive officer for Natixis Global Asset<br \/>\nManagement in the Americas and Asia. <em>\u201cOur Durable Portfolio Construction platform<br \/>\nemphasizes risk as the primary factor to determine asset allocation, which may give<br \/>\ninvestors the broader perspective needed to withstand market changes and surprises and<br \/>\ngenerate the returns they are seeking.\u201d<\/em><\/p>\n<p><strong>Generating return in efficient markets<\/strong><\/p>\n<p>More than half (55%) of institutional investors agree that traditional assets are too highly<br \/>\ncorrelated to provide distinctive sources of return. As the markets become more efficient,<br \/>\nthey are looking for new sources of performance. The survey found that most have turned<br \/>\naway, in some measure, from traditional asset allocation and toward a greater use of<br \/>\nalternative strategies:<\/p>\n<ul>\n<li> 75 percent of investors feel that alpha is becoming harder to obtain as the markets<br \/>\nbecome more efficient.<\/li>\n<li> 81 percent agree that alternatives are suitable for institutional portfolios, and 60<br \/>\npercent say they are a good source of returns.<\/li>\n<li> 71 percent believe that alternatives are necessary for institutional investors to manage<br \/>\nliabilities and longevity risk.<\/li>\n<\/ul>\n<p><strong>Where\u2019s the alpha? ESG investing<\/strong><\/p>\n<p>Many investors say they believe so-called ESG investing can be both a source of return<br \/>\nand a way to reduce risk. An ESG approach to investing takes nonfinancial factors \u2013<br \/>\nenvironmental, social and corporate governance \u2013 into account to help determine the<br \/>\nlong-term sustainability and ethical impact of an investment. The survey showed:<\/p>\n<ul>\n<li> 54 percent think that ESG investing has long-term growth and alpha benefits.<\/li>\n<li> 55 percent agree that ESG investing mitigates risks such as loss of assets due to<br \/>\nlawsuits, social discord and environmental disasters.<\/li>\n<\/ul>\n<p><strong>Market picks for 2015<\/strong><\/p>\n<p>As they look ahead to 2015, institutional investors are wary of higher interest rates and in<br \/>\nfavor of equities. <em>\u201cEven as they perceive stocks as next year\u2019s best investment category,<br \/>\ninstitutional investors are cautious,\u201d<\/em> Hailer said.<\/p>\n<p>Among the survey findings:<\/p>\n<ul>\n<li> 67 percent of institutional investors expect difficulties over the next three years linked<br \/>\nto rising interest rates, and 81 percent say it will be challenging to manage volatility in<br \/>\nthat time.<\/li>\n<li> As rates rise, the top three ways institutional investors plan to position their portfolios<br \/>\nare to move from long to shorter-duration bonds (61%); reduce exposure to fixed-income<br \/>\n(46%); and increase use of alternative strategies (36%).<\/li>\n<li> 46 percent of institutional investors predict stocks will be the strongest asset category<br \/>\nin 2015, with U.S. equities standing above those from other regions.<\/li>\n<li> Another 28 percent identify alternative assets as top performers, with private equity<br \/>\nleading the way in that category.<\/li>\n<li> Only 13 percent predict bonds will be best, followed by real estate (7%), energy (3%)<br \/>\nand cash (2%).<\/li>\n<\/ul>\n<p><em>\u00ab In terms of asset allocation, real estate and value investments are favored by global institutional investors for next year: 40% plan to increase these strategies in their portfolio. Income generating investments is also in a good position, mentioned by 36% of respondents \u00bb<\/em>, states Christophe Point, Managing Director, Head of France, Geneva and Monaco at NGAM Distribution. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to Natixis Global Asset Management, while institutional investors are optimistic about equities in 2015, their outlook is tempered by market risks beyond their control and unknown liability risks ahead, particularly those linked to increased longevity&#8230;<\/p>\n","protected":false},"author":20,"featured_media":38904,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1481],"tags":[1809,1655,1437,1724,2091,1678,1680],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/38906"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=38906"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/38906\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/38904"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=38906"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=38906"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=38906"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}