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The survey analyzes the investment perspectives of global financial professionals on a range of topics across investment sentiment, sustainability and public and private markets. North American respondents are from different institutional segments, including pension funds, insurance companies, family offices, endowments and foundations, and official institutions. This year's survey found that almost two-thirds (63%) of North American institutional investors believe that the elections taking place globally this year are short-term noise and are remaining committed to their long-term investment strategy, compared to less than half (45%) of global institutions. Across segments, endowments and foundations most strongly agree with this mindset with 77% of investors calmly staying the course.

Monetary policy and the economy drive portfolio decisions

Monetary policy and economic uncertainty are top-of-mind concerns in terms of institutional portfolio performance. North American institutional investors anticipate that central bank policy (75%), high interest rates (71%) and the potential for an economic downturn (62%) will have the highest influence over clients and overall portfolio performance over the next 12 months. Inflation risk was also a key factor for 63% of pension funds, as was geopolitics for insurance companies (62%) and endowments and foundations (70%).

"Many institutional investors understand that the immediate impact the election has on the markets is temporary and that a well-informed, long-term view is crucial in constructing a resilient investment strategy. However, that still leaves nearly two in five institutions that are changing their risk profile, demonstrating that many anticipate long term policy changes tied to the results," said Adam Farstrup, Head of Multi-Asset, Americas. "We may not know the outcome of the election, the next turn in markets, or the next geopolitical surprise - however, building a broadly diversified portfolio meant to weather various market cycles and events is key to pursuing strong returns amid all economic concerns, known and unknown."

AI adoption somewhat slow, but interest is there

Additionally, Artificial Intelligence (AI), is beginning to make its way into institutions and their investment processes. A majority of North American institutions across segments have either a somewhat positive or very positive sentiment towards incorporating AI into their work, particularly within investment research and portfolio construction internally (59%) and for internal operational processes within one's organization (54%). Despite this, not that many institutions have actually incorporated it. Only about a third have adopted AI for internal operational efficiency (34%) and for investment research and analysis (31%). Additionally, nearly one in five (20%) North American institutions are not currently using AI but have plans to do so over the next one to two years.

The technological revolution spurs private market investment opportunities

Seventy-three percent of North American institutional investors surveyed highlight that they currently invest in private markets, with the highest percentage being from endowments and foundations (80%).

Within the asset class, respondents overall identified private equity and private debt as the top two areas where they will increase allocation over the next 12 months. Fifty-six percent of pension funds in particular selected private debt as a top choice, followed by infrastructure debt and renewable infrastructure equity (both 37%). This is in line with data finding that North American institutional investors also see investing in private markets as a way to capture opportunities brought about by the energy transition, with overall respondents identifying power grid infrastructure (62%) and emergent technologies like hydrogen and carbon capture (47%) as the best investment opportunities amid this shift.

In addition to the energy transition, the survey also identified technology as a key theme driving private equity investment. Sixty-three percent of respondents identified the technological revolution, defined as a period where new technologies are rapidly adopted and spread causing significant changes in society and the economy, as a theme or sector that they are seeking to proactively allocate to via private markets in the next one to two years.

Additionally, private markets opportunities within fixed income are appealing to North American institutional investors, with over half (56%) noting that the biggest investment opportunity in the asset class over the next one to two years is private credit, slightly higher than the global institutional average of 47%. Different forms of private debt offer protective characteristics such as lower volatility and increased income opportunities that investors may be evaluating for their portfolios.

Nick Thompson, Head of Private Asset Sales, North America, commented, "As institutions search for diversification amid a set of increasingly volatile macroeconomic conditions, it is no surprise that investor momentum for private market strategies is continuing. We are seeing ample opportunity across the private markets spectrum to capitalize on the major themes impacting our world today, such as technology and the energy transition, as well as deglobalization, changing demographics and a changing interest rate and inflation landscape. Specialization and the complexity premium are the keys to unleashing private markets alpha in this stage of the cycle."

Press release

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