Rod Aldridge Opalesque Industry Update - The Eurozone debt crisis is considered by investment professionals to be the most significant threat to investment growth over the next six months, with over two thirds (68%) citing it as one of the biggest Global macro-economic investment challenges, according to the Barings Investment Barometer1. Just 46% considered this a significant challenge in the last quarterly survey2, demonstrating that the Irish debt crisis and worsening situation in Portugal have renewed concern amongst the investment community for Eurozone stability.
The barometer, that explores intermediary attitudes towards the current economic environment and outlook as well as opinion towards the various asset classes (full results below), also found that concern for inflation is growing, with 32% saying that it is a significant challenge to investment growth. This up 14% on the last survey. A majority (74%) of investment professionals also say that their clients are concerned about the impact of inflation on their cash investments, and 86% say their clients have already, or plan to, reallocate cash investments to inflation protected assets. Reflecting this, cash is the least favoured asset class with 80% finding it unfavourable.
The prospect of a second banking crisis is more of a concern than it was three months ago (18% up to 30%) but much fewer are concerned about a double dip recession, with 7% considering this a threat to investment growth compared to the previous figure of 21%.
To help their clients through the current market volatility, 73% of advisers are encouraging greater diversification of assets. This is an increase on the last poll when 61% said they were doing this. Now, almost half (49%) of advisers are also recommending clients conduct more regular reviews of their investment portfolio.
Rod Aldridge, Head of UK Retail Distribution at Barings comments: “Market volatility continues to be at the forefront of investment advisers’ minds, especially with mounting concerns over the Eurozone. It is good to see that investment professionals are placing such a great focus on diversification and the regular review of their clients’ portfolio to best mitigate the risks of volatility.”
In terms of asset class favourability, emerging market equities and Asian equities (excluding Japan) remain at the top of the leader board in the ranking of investment professionals’ most favoured asset classes (with 95% favourable to emerging market equities and the same number favourable to Asian equities - excluding Japan). The barometer also shows that about two-thirds (63%) of investment professionals are encouraging investors to increase their allocation to emerging market equities and half (50%) believe investors should be increasing exposure to Asian equities.
Nearly two thirds (66%) are advising clients to decrease exposure to fixed income, more than any other asset class. This is an increase on the last survey when just over half (53%) where advising this.
Rod Aldridge comments: “It is encouraging to see that emerging market equities continue to be a most favoured asset class. We strongly believe that conditions for investing in emerging markets are attractive as they remain fairly valued with positive prospects for investment return. “