Almost half of big investors predict a stock-market drop in 2020

(Financial News) Almost half of the world’s large investment funds, such as pension schemes, endowments and insurance firms, think the stock market is due for a correction in 2020, according to the latest survey of their views.

The finding, from an annual survey by Natixis Investment Managers of 500 funds worth a collective $15tn, marks an uptick in scepticism from last year.

While 48% of respondents to the survey said they fear a stock-market setback this year, 41% said the same at the end of 2018.

The S&P 500 has risen 25% in 2019, while the MSCI World is up 22.4% in dollar terms.

Despite the apparent rise in converts to the bearish cause, the world’s largest investors are not making significant changes to where they put their money. “Asset allocations remain in a holding pattern,” Natixis reported.

The French fund manager found small declines in the sums its respondents have invested in public equity markets — 36.5% to 35.8% — and bond markets, from 39.1% to 38.7%.

The winner was off-market “alternative” investments, a catch-all term for property, private equity, infrastructure and certain kinds of hedge funds and illiquid debt funds. That went from 17.5% to 18.7% of investors’ portfolios — an implied net investment of around $180bn, based on total assets of $15tn in the survey.

Natixis said that was down to the tumbling yields available on traditional bonds. Investors’ appetite for alternatives “reflects how far afield institutional investors are willing to go for yield replacements”, it said, and the company expects more money to flow into “private debt, infrastructure and real estate” — a trend underway for several years.

Natixis said: “Institutions are happy to hold the hand they’ve been dealt and appear to want to moderate overall risk exposures.”

Looking ahead to 2020, Natixis said respondents expect politics to continue to weigh heavy on the market’s prospects. Sixty-nine per cent of respondents said countries interfering in one another’s elections is becoming an increasing problem around the world, and 64% said the US presidential poll next year will be a major source of market volatility.

Andrew Benton, head of northern Europe for Natixis Investment Managers, said that big-money investors “expect a global slowdown to come sooner rather than later”, but “despite forecasts of recession in the near term, uncertainty grips investors and is so far preventing them from making meaningful changes to portfolios as they adopt a wait-and-see approach”.

Natixis said its survey, conducted by pollster CoreData during October and November, comprised responses from pension funds, endowments, insurance firms and sovereign wealth funds based in 29 countries throughout North and South America, the UK, continental Europe, Asia and the Middle East.

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