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Pension fund investors unwillingly increase equity

This is the paradoxical outcome of a survey among 420 senior executives of pension funds, foundations and sovereign wealth funds in the United States, Europe and Asia-Pacific. The survey was commissioned by State Street Global Advisors.

Almost two thirds of respondents have been increasing their exposure to developed market equities this year, while approximately half have upped their allocation to emerging market equities. The reason that many now want to reverse these increases and take some profit is that they expect a strong market correction to occur sooner rather than later.

Bracing for the worst

More than half of the respondents believe price falls between 10% and 20% are likely or very likely to occur in both developed and emerging market equities in the next 12 months. It’s not exactly clear where this market correction is supposed to come from though. The most popular trigger is increased geopolitical risk (43%), followed by a slowdown in emerging markets (41%).

 

As far as Expert Investor Europe’s readers are concerned, the biggest risk for a market correction is in the US. Valuations look dangerously high there, while the central bank’s monetary police path looks unsupportive of equities. Accordingly, a third of your peers plan to decrease their allocation to US stocks in the next 12 months. The only asset class which is more unpopular than US equities is developed market government bonds, with 47% of fund selectors planning to decrease their exposure.

Click here to view the full survey.

Part of the Bonhill Group.