Uncertainty remains the dominant theme for professional fund selectors over the coming year, according to analysis undertaken by Natixis Investment Managers.
The firm attributed this anxiety to escalating global tensions, low expectations for economic growth and a higher interest rate environment weighing on sentiment. The research canvassed the views of 500 investment professionals in 26 countries managing a total of $34.8tn for (€32.3tn) public and private pensions, insurers, foundations, endowments and sovereign wealth funds.
“It is clear fund selectors expect the 2024 investment landscape to be anything but normal,” commented Natixis head of UK sales Darren Pilbeam. “Despite the shifting environment, the challenges ahead are a result of continued macroeconomic and market trends – such as prevailing higher rates, the rapid impact of AI and the possibility of an emerging markets bounce-back – that are being forecast and planned for accordingly. Against this backdrop, selectors are preparing product and investment strategies that do not just fit immediate client needs, but also help support them through a year that could be just as volatile as 2023.”
He added: “In equities, selectors are counting on large caps to carry them through what could be a turbulent year and are lengthening duration on bonds to capitalise on the rate environment. Private assets and active management are also increasingly coming to the fore for selectors, as they seek to protect portfolios in a challenging year.”
Spectre of slower growth
According to Natixis, the spectre of slower growth has elevated recession to the top of fund selectors’ list of concerns, with 52% of respondents highlighting it as a worry, followed by the threat of war and terrorism (50%), and a central bank policy error (36%).While most (56%) remain optimistic about this year’s market performance, however, their outlook is muted by a high degree of uncertainty and unpredictable risk.
Almost three-quarters (69%) of fund selectors think valuations still fail to reflect company fundamentals, while 65% expect stockmarket volatility to be even greater this year than last. And while three-fifths (62%) believe their country’s economy will experience a soft landing, a similar proportion (60%) see the greater risk coming from stagflation, with concerns running highest in Asia (79%), EMEA (66%) and the UK (58%).
