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Alternative Market Briefing

Institutional investors expect inflation to continue to rise

Wednesday, August 31, 2022

Bailey McCann, Opalesque New York:

A new survey from Ortec Financial shows that a majority of pension fund managers expect "dramatic" increases in inflation over the next 12 months.

The survey included responses from pension fund managers responsible for a collective $1.946 trillion in assets under management.

The responses show that pension fund managers are taking steps to protect their portfolios from inflation by making updates to their target allocations. Over half (56%) have switched investments to commodities, inflation-linked bonds (56%) and infrastructure (51%).

Pension fund managers say they are set to further change allocations in the year ahead to continue to help hedge against inflation. Over half (53%) plan to increase allocations to inflation-linked bonds while nearly half (49%) will switch to commodities and 49% to real estate investment trusts (REITs) over the next 12 months.

Over half of respondents to the survey said that they feel "well hedged" against inflation at the moment but maintaining that position will require ongoing monitoring. Many pension funds have reported losses through the end of the fiscal year, indicating there has been a bit of an adjustment period as pension fund managers rethink allocation strategies.

The Philadelphia Public Employees Retirement System reported a net return of -7.5% for the fiscal year ended June 30. The Oklahoma Teachers' Retirement System, was also down, posting a net return of -9.5% f......................

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