State Street survey: Investors eye increased allocations to equities, private credit

More than a third of institutional investors are planning increased allocations to private credit, according to recent survey results from State Street Corp. The custodial bank surveyed 250 investment professionals at pension funds, endowments, insurance companies, sovereign wealth funds and other institutions managing assets globally. The study was focused on the market impact of the COVID-19 pandemic. With the high levels of coronavirus-induced market volatility in the first quarter of 2020, the majority of institutional investors (64%) admitted they may fail to meet their short-term targets, according to survey results from State Street. The survey found that more than half of investors (56%) believe they will still meet their long-term investment objectives. “COVID-19 took both investors and managers by surprise,” said John Lehner, global head of asset manager segment at State Street. “Despite concerns about managers’ ability to predict the impact of the crisis and the hit it might have on short-term investment objectives, it is also clear that there is strong support for asset managers to navigate the crisis and deliver returns in the long term.” Even in this time of increased market volatility, more than half of investors (52%) globally are looking to increase their exposure to equities in the next three to six months as they hunt for value. Interest in private credit was on the rise too with 35% of investors planning increased allocations in the space. State Street found that majority of investors do not expect a rapid ‘V-shaped’ recovery from the crisis, with two-thirds (66%) not expecting economic activity to return to normal before 2021 or even later. Officials also report widespread doubt regarding government and central bank interventions to alleviate the crisis will lead to a faster recovery than after the Global Financial Crisis in 2008. As most said that it is too early to tell, and roughly 15% are anticipating a slower recovery. The survey also revealed other concerns including 37% of institutional investors that said securities valuations were ‘challenging’ or ‘extremely challenging’ during the crisis. That concern was followed by liquidity (34%), timely reporting (34%) and cash forecasting (30%).

State Street survey: Investors eye increased allocations to equities, private credit

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