More than three quarters of U.S. institutional investors are expecting interest rates and inflation to remain elevated for at least the next 12 months, putting fixed income investments in pole position to generate the best returns in 2024.
A new report from CoreData also reveals that these organizations are tiring of active equity strategies that are underperforming with four in ten offboarding those that do not hit the mark. A similar share is raising their hurdle rates for risk assets.
The current rate and inflation environment is influencing low-risk strategies with attractive risk-free yields available. Respondents have raised strategic allocations to government bonds/cash-like investments (43%), slowing new investments into risk assets (43%), and trimming their exposure (30%).
Not that active strategies are off the table. In fact, 54% of poll participants expect their actively managed equity strategies to deliver strong outperformance in the next year, while expectation for equities overall is muted with 35% bullish on U.S. equities in the next three months compared to 45% bearish. Just 10% are bullish on Chinese equities over the same period vs. 78% bearish.
Investors rank the economic outlook, rate expectations, and valuations as their top three drivers of their outlook for equities over the next three months.
Seven in ten respondents say tech stocks are overvalued and a catastrophic market event is also a rising concern with 47% saying a tail risk event is more likely than average. Eight in ten say quality will drive performance in the next three months.
“These results show that 5% risk-free yields have completely changed the calculus for institutional
investors,” said Michael Morley, US Research Director at CoreData. “The trend of de-risking portfolios
and consolidating active investments with high conviction managers is likely to accelerate, putting a
painful squeeze on the industry which is already faced with a low beta environment.”
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.
It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.
Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
