Around two-thirds (64%) of major institutional investors globally believe that today’s markets impose a need to completely rethink how they approach portfolio construction, according to a survey carried out for Nuveen, the investment manager of TIAA.

Slightly more respondents (66%) are more worried now than two years ago about extreme events disrupting their investment strategies.

The survey was carried out before Russia’s invasion of Ukraine, having been conducted in October and November 2021. The ‘Equilibrium Global Institutional Survey’, Nuveen’s second, was given to 800 decision-makers at global institutional investors and consultants with at least $500m in assets to analyse how investors are reacting to rising inflation and interest rates, a spate of climatic events, volatile markets and increased awareness of social inequality.

“With all the complexity and rapid change now driving communities, economies and the environment, institutional investors urgently need a forward-looking perspective and the flexibility to consider new approaches,” said Mike Perry, head of Nuveen’s global client group.

With regard to the Russia/Ukraine conflict, Perry said the asset manager did not believe it should be driving long-term portfolio strategy changes, but that continued volatility across risk assets was expected if events in Ukraine continued to escalate and the global security response increased.

Other findings from Nuveen’s survey included that 50% of EMEA respondents consider fundamental long-term market dynamics to have lost relevancy, and that 58% are taking steps to combat the risk of increasing inflation over the next 12 months. In addition:

  • 76% of EMEA investors say they plan to expand their reach to yield over the next two years;
  • 60% are looking to alternative credit, 37% say they will increase allocations to infrastructure over the next two years, and 35% say so for private equity;
  • 84% of EMEA respondents agree the transition to a low carbon economy is inevitable;
  • 87% believe the transition will present new investment opportunities;
  • 44% of EMEA Investors report their investment policy is well practiced compared with 23% in North America and 34% in APAC.

The survey also asked about diversity, equality and inclusion (DEI), with 45% of EMEA asset owner and consultant respondents saying they have set clear goals and targets for DEI hiring, retention and development. Another 30% are considering these steps.

Globally, over half (55%) of asset owners and consultants indicate that DEI metrics influence the manager selection process, and 61% responded to say they set, or are considering setting, standards of investment partners and consultants around DEI measures and targets.

Separately, half of asset owner respondents globally reported currently investing in social investments or planning to in the next two years.

Nuveen said the investors are exploring a range of opportunities, from community infrastructure projects (43%) and fintech innovations addressing financial inclusion (42%) to investments focussed on DEI (40%) and affordable housing (38%). 

Biodiversity interest, divestment appetite on the up

Earlier this week, Robeco published its second climate risk survey. Findings included that biodiversity is becoming at least a significant factor in investment policy at a growing proportion of investors and that there was an “enhanced drive” by investors to seek real-world impact, noticeable in increasing adoption of thematic investing and impact investing.

In addition, active ownership has risen from being at the centre or a significant factor in 54% of investment policies two years ago to 73% today, a trend strongest among European investors but present elsewhere, too.

Three-quarters of investors said they viewed active ownership and engagement as ‘effective’ or ‘very effective’.

At the same time just over one in 10 investors globally said their approach to oil and gas companies was to completely divest because of the investors’ views on climate change, with 22% indicating this would be their approach in the next two years.

Nuveen’s and Robeco’s survey reports can be found here and here.

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