Nearly two-thirds (63 per cent) of North American institutional investors say they’re sticking to their long-term investment strategy amid the short-term noise of the various elections taking place globally this year, according to a new survey by Schroders.
The survey — which polled more than 2,800 professionals across more than 400 institutional investors, including 92 Canadian organizations — found endowments and foundations (77 per cent) were most likely to say they’re staying the course.
When asked which factors will have the highest influence over clients and overall portfolio performance during the next 12 months, respondents cited central bank policy (75 per cent), high interest rates (71 per cent) and the potential for an economic downturn (62 per cent). Among pension plan sponsors, almost two-thirds (63 per cent) said inflation risk was also a key factor.
The survey also found more than half of institutional investors said they have either a somewhat positive or very positive sentiment towards incorporating artificial intelligence into their work, particularly within investment research and portfolio construction (59 per cent) and internal operational processes (54 per cent). However, only a third have adopted AI for internal operational efficiency (34 per cent) and for investment research and analysis (31 per cent). Additionally, one in five (20 per cent) said they’re not currently using AI but have plans to do so over the next one to two years.
Roughly three-quarters (73 per cent) of North American institutional investors said they currently invest in private markets, a percentage that increases among endowments and foundations (80 per cent). Among pension plan sponsors, more than half (56 per cent) cited private debt as a top investment choice, followed by infrastructure debt and renewable infrastructure equity (37 per cent each).
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The survey found North American institutional investors see private market investments as a way to capture opportunities brought about by the energy transition, including opportunities in grid infrastructure (62 per cent) and emergent technologies like hydrogen and carbon capture (47 per cent).
Almost two-thirds (63 per cent) of respondents identified the technological revolution, defined as a period where new technologies are rapidly adopted and spread causing significant changes in society and the economy, as a theme or sector that they are seeking to proactively allocate to via private markets in the next one to two years. More than half (56 per cent) noted the biggest investment opportunity in private markets over the next one to two years is private credit.
“As institutions search for diversification amid a set of increasingly volatile macroeconomic conditions, it’s no surprise that investor momentum for private market strategies is continuing,” said Nick Thompson, head of private asset sales for North America at Schroders, in a press release. “We are seeing ample opportunity across the private markets spectrum to capitalize on the major themes impacting our world today, such as technology and the energy transition, as well as deglobalization, changing demographics and a changing interest rate and inflation landscape. Specialization and the complexity premium are the keys to unleashing private markets alpha in this stage of the cycle.”
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