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.”
Elsewhere, a Commonwealth team in Massachusetts converts to Cetera, while Janney draws four former Wells Fargo advisors to its Radnor, Pennsylvania office.
Clients say he copied the boss on his emails - and now they can't touch their cash.
He wired millions to his own accounts and told investors the fund was winning.
The partnership arrives as most small business owners near retirement age still don't have a formal succession plan in place.
A spokesperson for the estate planning fintech cited AI's reshaping of the industry as Trust & Will restructures its business.
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
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
