For JPES, this time of year also follows the publication of our asset owner research, where we survey asset owners, responsible for £2 trillion of assets under management across the investment spectrum including DB and DC pension schemes, wealth managers, fund platforms, investment consultants, fiduciary managers and insurers, about their asset allocation priorities for the year ahead.
As we review some of our key findings, and what they might mean for our clients, we can see where our research dovetails with current headlines. For example, as 70% of respondents tell us they are rethinking their investment strategies, particularly in relation to risk, we read a growing number of articles about the increasing influence of geopolitical risk, the effect it is having on corporates as they hire diplomats to advise them about ensuing crises, and how investors are asking for EM ex China funds and looking to other countries to reduce their exposure to this particular risk.
Similarly, our respondents told us that ESG is less top of mind than it was a year ago and reading the FT’s asset management annual round up, its second theme of the year is, “The ESG backlash.” Although this headline pertains more to the US than the UK and Europe, it was just a month ago that the same paper reported that UK investors were pulling money out of responsible investment funds, “at a record rate.” It is fair to say that as market conditions have become more challenging, it is an area of investment now under increasing scrutiny and regulation to ensure it can deliver for investors.
A year ago our research told us that demand for private markets was increasing. Today, with exit options for private equity more challenging, we see this area of the market has become more nuanced, as investors consider private credit and infrastructure. It remains an interesting time for the private / public markets in the UK and in Europe. In the UK, particularly as we head towards a General Election, the success of the UK economy, which has traditionally been tied to the success of the City, may become a key part of the campaign trail. So far questions remain over the efficacy of the Mansion House reforms, both for pensions and for UK companies. A recent Financial News headline reads, “A dam has to burst…” as bankers hope for a 2024 recovery. We have to hope that indeed the flow of capital returns to the UK.
Finally 2023 has seen Bonds return to favour with both institutional and retail investors as interest rates moved higher, although the jury remains out on for how long and whether inflation has been tamed or not. Our research shows asset owners plan to allocate particularly to Investment Grade and High Yield Bonds over the next 12 months, a sign that whilst the asset class is back, investors still need to be discerning as uncertainty looks set to remain.
For further information on the JPES Asset Owner research, “Navigating a new investment landscape: Asset owner priorities in 2024,” please contact our Head of Investment, Matt Rogers – email@example.com