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Institutional investors expect GFC in the next 5 years
Global institutional investors are concerned about rising public debt levels and low economic growth as they predict a global financial crisis in the coming years.
Institutional investors expect GFC in the next 5 years
Global institutional investors are concerned about rising public debt levels and low economic growth as they predict a global financial crisis in the coming years.
According to Natixis, which surveyed 500 institutional investors, eight in 10 are bearish on global markets, expecting a downturn in the next five years.
A further 58 per cent of respondents believe the downturn could be sooner, with markets predicted to fall in one to three years.
Damon Hambly, Natixis Investment Managers Australia CEO, said investors are facing complex macro-economic challenges, making portfolio construction difficult.
“There is a general expectation of a global slowdown sooner rather than later, but we have seen institutional investors adopting a wait-and-see approach this year, rather than making any meaningful changes to their portfolios,” Mr Hambly explained.
As interest rates remain at ultra-low levels, institutional investors continue to be challenged to find yield.
This has resulted in three-quarters of respondents believing that they have taken on too much risk in pursuit of yield.
Over half of investors (56 per cent) believe negative yielding bonds will increase in 2020, with 54 per cent of respondents concerned that central banks do not have the tools they need to manage through a new crisis.
Louise Watson, head of distribution at Natixis Investment Managers, noted that these low interest rates are seeing investors push towards alternative sources of yield.
“Australian investors understand that uncertainty in global politics make all markets more volatile and that the current ‘lower for longer’ interest rate environment will make their hunt for yield challenging.
“While global growth is likely to remain slow, they are aware it will take time and are patiently waiting to see which trends will actually play out in the year ahead,” Ms Watson concluded.
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