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Institutional investors believe return targets are out of reach

Six in 10 institutional investors in the northern half of Europe believe they will fail to generate their target return over the next three years, according to a poll by Union Investment. Unlike their peers elsewhere, German investors put the blame squarely on the low-yield environment.

Even though most investors believe they can’t reach their return targets, they are not prepared to take more risk. Three quarters of respondents consider avoiding losses their top priority.

Union Investment, which polled 212 institutional investors in Germany, Switzerland, the UK, the Netherlands and the Nordics, found that half of German institutional investors think low interest rates are the sole reason for investors undershooting their return targets.

This contrasts strongly with the attitude of other investors in Europe. Only one in 10 Dutch investors, and 6% of investors from the Nordic countries, regard low interest rates as the main barrier to generating acceptable returns.

The finding didn’t surprise Alexander Schindler, board member of Union Investment. “Fixed income investments dominate the portfolios of German investors,” he said, adding: “Most other European investors have a much higher weighting to investments such as equities”.

This doesn’t mean, however, that those investors have an optimistic market outlook. Two thirds of total respondents believe there is an increased likelihood of bond and stock market bubbles forming because of crowd herding. The percentage of pessimists is, again, highest among Germans, at 74%. 

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