EUROPE - European institutional investors look set to maintain the portfolio strategies they held prior to recent market turbulence, suggests research. But German firms may be thinking of bringing more external management back in-house.

The Greenwich Associates European Investment Management Research Study found that after reviewing the events of the last 18 months and their investment portfolios, "many institutions have come to the conclusion that their strategies were, on the whole, sound".

Tobias Miarka, consultant at the firm, said "a sizeable share" of respondents to the survey are now planning to continue to create broadly diversified investment portfolios, and increase European and international equities allocations as well as alternative assets.

At the same time, however, evidence suggest German investors are reducing risk levels and will in future retain large fixed-income allocations - and in turn lower return expectations - but bring some external management in-house, according Greenwich.

The sum of assets allocated to external managers contracted by 4% between 2008 and 2009 and is also moving into lower margins products, findings revealed.

"Among the major shifts now playing out in the German market is a reduction in the amount of assets allocated to external managers, at least in the short to medium-term," said Miarka.

Investors moved assets into cash and passive strategies during the recent global market turbulence, Greenwich Associates found, as well as into European fixed income.

The prediction is there will be changes to European groups' active equity allocations, though it is unclear which direction they will move as some investors say they will raise equity holdings over three years while others plan to cut them, according to Greenwich.

Similarly, the direction investors will take is unclear on bonds too as 43% of those polled said they plan to make a significant change in allocation yet only 19% of are planning to increase bond holdings.

Miarka argued the findings suggest there is still a "degree of ambivalence" about future portfolio and risk strategies and no major rush to return to equity markets.

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