How Are Institutional Advisors Preparing for 2021?

Natixis recently surveyed 500 institutional investors who manage a combined $13.5 trillion. The poll found that many are maintaining or even raising 2021 return assumptions.

“After a tumultuous year with economies around the world shut down by Covid-19, markets proved remarkably resilient. Most institutional investors (64%) intend to keep as is or even to raise their return assumptions,” according to the survey.

Although interest rates are low throughout the world, institutional investors are likely to lean heavily on bonds next year. The same is true of equities.

“Broad asset class allocations will remain relatively unchanged in institutional portfolios, with 36% in stocks, 40% in bonds, 17% alternatives and 6% in cash. Yet institutional investors are taking advantage of what they expect will be increased dispersion in the markets, making many tactical adjustments within asset classes,” notes the Natixis survey.

Active management is on the mend, and the exchange traded fund wrapper is a big reason why. Expect that theme to continue into 2021.

Advisors are looking critically at traditional market indexes and the challenges of navigating today’s new market environment. Data suggest high-level investors are bullish on developing economies and large-cap equities.

“In the year ahead, a larger share of institutional investors expect value to outperform growth (58%) and large-cap to outperform small-cap (53%). Slightly more than half (52%) think emerging markets will outperform developed markets, though the vast majority (86%) of institutional investors agree on the need to be more selective in pursuing emerging market opportunities,” notes Natixis.

Asset allocators are expected to increase exposure to European, emerging market and Asia Pacific stock, according to the survey.

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