60% of respondents think ‘skin in the game’ would lead to better investment performance
Almost 70% said 60/40 stock and bond allocations would fail to deliver
86% said taking too little risk could be a longer-term problem
Half said a UK departure from the EU would be negative for the UK financial services industry
65% felt the UK financial system is still vulnerable to systemic risk
Half said EU regulation is the biggest threat to the UK financial services industry
London, 19 August 2013 – Equities are seen as the most compelling asset class by nearly two thirds of investors, according to the latest MHP Communications’ survey on the future of the European pensions & investment industry.
The 2013 survey, the fifth to be conducted by MHP Communications within the European pensions and investment industry, found that a large majority of respondents (62%) see equities as the most appealing asset class over the next 12 months, compared with only 35% in 2012, while nearly a third (32%) cited equities as the most compelling emerging market asset class. After equities, the next asset class expected to be the most attractive was hedge funds, with 16% of the vote. More than four out of five investors (86%) agreed that some element of leverage is necessary for investors to achieve their goals.
Doubts persist, however, about the UK financial system’s vulnerability to external shocks, with nearly two thirds (65%) concerned about systemic risk. And more than half (54%) believe EU regulation poses the biggest threat to the UK financial services industry, although almost half (48%) thought there would be a negative impact on the industry if the UK left the EU.
Concerns about regulation also dominated respondents’ feedback on ‘what keeps you awake at night’, with one complaining that EU heavy-handedness could cause Europe and London to lose substantial business to other financial centres, while another worried about the inability of central banks to change the course of global markets. A third of respondents said the Alternative Investment Fund Managers Directive (AIFMD) was shaping up to be the most important regulatory issue in the next 12 months. However, only 13% were concerned about the Retail Distribution Review (RDR), which one said was now “bedded down and working in the advisory community.”
There were strong opinions on investment best practice by pension funds, with 67% agreeing that pension funds sticking to a typical 60/40 stock and bond allocation would fail to meet their promises. The concept of managers having ‘skin in the game’ by co-investing in their own products alongside clients was also widely accepted; 58% of respondents believed this would improve investment performance.
Other highlights of the survey include:
Multi-strategy asset management companies were likely to prove the most successful in the next 12 months, according to 48% of respondents, up from 30% in 2012. Only 3% opted for fiduciary management in this section, down from 12% last year
A third of respondents picked emerging market equities as the most compelling emerging markets product for investment returns, up from 22% in 2012. Those opting for emerging market debt fell from 17% in 2012 to 7% in 2013.
Less than 5% opted for fixed income as the most compelling asset class for investors over the next 12 months, down from 18% in 2012.
Commenting on the survey findings, Sally Todd, Managing Director at MHP Financial, said:
“This year’s survey reveals a notable upturn in investors’ appetite for equities, including emerging market equities, along with a broader acceptance that some element of leverage is essential if investors are to meet their targets, and that taking too little risk can also be a long-term problem. Less than 15% of respondents thought any leverage is unjustifiable.
“The impression given is that investors while all too aware of the ongoing vulnerability to the possibility of harmful impacts from external shocks and EU regulation, are nonetheless developing an appetite for “riskier” assets and prudent leverage in order to meet their goals.”
Ends
Survey methodology
MHP surveyed 72 senior figures at leading European pension funds, consultants and investment management houses, including CEOs, CIOs and Heads of Communications. Of those undertaking the survey, 53% work within the asset management sector, 14% in the pensions arena, 12% in a consultant/advisory role, with the remainder being senior figures from a range of other financial backgrounds. The research was carried out during July and August 2013. Full statistics are available on request.
For further information, please contact
Sally Todd sally.todd@mhpc.com 020 3128 8515
James Morgan james.morgan@mhpc.com 020 3128 8533
@MHPFinancial
About MHP Financial
MHP Financial is a 45-strong team of professionals with specialist sector expertise in financial services and financial & investor communications, within MHP Communications. Our team of experienced advisers offers unrivalled insight, access and knowledge through long-standing relationships with media, key industry audiences and their influencers. We advise leading companies in the fields of asset management, banking & capital markets, private equity, professional services, pensions, consumer financial services, investment companies and listed corporates www.mhpc.com/financial