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Doubts over European long-only equity - survey

EUROPE - European institutions including pension funds have expressed doubt about asset managers’ long-only equity returns in the future, according to a new survey organised by alternative investment groups.

Thirty-percent of respondents to a survey organised by the Alternative Investment Management Association and IPM Informed Portfolio Management said their expectations of external managers’ future returns in the asset class were “doubtful”. Just 15% were confident, with 42% “hopeful”.

And 39% of institutions said that historical long-only equity returns were below their expectations, against 10% who said they exceeded and 38% who said they met expectations.

The survey, which polled 151 of Europe’s largest institutional investors, found the use of hedge funds and active currency management was set to rise.

“The portion of institutions active in the last two processes is expected to increase to 60% over the coming two years,” from a current level of 30-40%, the survey said.

“In two years’ time, over 60% of institutions will be active in each of the alternative investment categories: hedge funds, private equity, currency management and tactical allocation.”

And it said: “Over the coming two years, the majority of activity in external management is expected to come from Holland and the UK, especially in hedge funds and currency management.”

The report also found a disparity between countries on annual return targets. Institutions in Germany, the Netherlands, the Nordic region and Switzerland tended to set such a target, ranging between 64-83%. But only 33% of institutions in the UK set a target.

The institutions’ return targets range between 5.2% in Switzerland and 6.8% in the UK.

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