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Emerging market equity most popular asset class with pension schemes

14 September 2017

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Emerging market equity is the asset class being considered by the most investors for the six months ahead, according to a survey of pensions schemes, asset managers, and consultants.

The Investment Considerations Survey, by Camradata, found more than half of those surveyed said they would consider investing in emerging market equity.

Global Equity was the second most popular asset class, while diversified growth funds and corporate bonds were also selected by 40% or more respondents.

For the most recent six-monthly survey participants shared their considerations about investments, asset classes, asset allocation and financial markets for this year.

Camradata managing director, Sean Thompson, said: "While emerging market equity and global equity were selected by most investors, all asset classes are being considered to some extent right now including private equity, private debt, infrastructure, high yield bonds, and Japanese equity and many others."

Top of investment concerns was the low yield environment, which the market continues to experience, followed by the importance of meeting total return objectives – an issue that is high on investors' agendas.

Thompson added: "Investors also appear to be more concerned about protecting capital and economic uncertainty than market volatility.

"The uncertainty around Brexit, Trump's leadership and the challenges of optimising market performance, and balancing risk over return, are also issues that will impact investment decision making."

While Environmental, Social and Governance (ESG) is also a hot topic in the asset management industry, more than half of pension schemes, consultants and investors did not expect asset managers to have integrated ESG into their investment strategy.

"Contrary to the views of investors and consultants, most asset managers have integrated ESG into their investment process," Thompson said.

In terms of interest rate rises over the next year, over 70% of respondents said they didn't expect any changes in the UK or Euro interest rates, whereas 61% believe interest rates in the US will increase by 25bps over the same period.

Thompson concluded, "Most respondents are pretty neutral about the outlook for investments in the US, UK, European and global financial markets over the next year.

"However, there appears to be slightly more optimism in the market especially with the European and global financial markets, but slightly more pessimism with the UK and US markets."

First published 14.09.2017

Lindsay.sharman@wilmingtonplc.com