Geopolitical concerns have become the top worry for institutional investors in the UK, with 67% foreseeing an imminent recession, according to a study by Natixis Investment Managers. The survey, involving 57 UK investors managing a combined $23.2 trillion globally, revealed apprehensions about potential recession and central bank policy errors. In contrast, only 2% of investors claim to have recession-proof portfolios. The report underscores UK investors' optimistic outlook on bonds, private equity, and private debt, but geopolitical risks and fears of consumer spending slowdowns cast a shadow over their economic sentiment.
Globally, institutional investors are split on inflation predictions for the upcoming year, with 40% expecting sustained high levels and another 40% anticipating reductions. In the UK, 51% predict a decrease in inflation, but 60% accept higher inflation as the new normal. The study also explores the impact of artificial intelligence (AI) on investments. While 63% of UK investors perceive AI as a potential geopolitical risk, 77% acknowledge its potential to reveal new investment opportunities. Opinions on AI's future role vary, with many comparing it to "Moneyball" for its data analysis capabilities, yet concerns persist regarding AI's existential threats.
The popularity of private assets has made sourcing valuable investments more challenging, with 58% of UK investors finding it difficult to identify worthwhile opportunities. Despite regulatory apprehensions surrounding private markets, active investment strategies continue to dominate, with 71% of current institutional assets in the UK being actively managed. Moreover, 65% reported that active investments outperformed passive ones in 2023. However, there is a growing unease about the systemic risk associated with the increasing popularity of passive investments.
The findings shed light on the evolving landscape of institutional investments in the UK, where geopolitical uncertainties, recession fears, and the delicate balance of inflation expectations are shaping investor strategies across various asset classes.
By fLEXI tEAM