Professional fund selectors surveyed by Natixis Investment Managers have identified interest rates and inflation as their biggest portfolio concerns for 2022.
Seventy percent of the 436 investors surveyed, who collectively manage $12.6 trillion in assets, said that interest rates were a top risk this year while 68 per cent pointed to inflation.
Valuations (48 per cent) and volatility (47 per cent) were also ranked as major concerns.
Meanwhile, supply chains were seen as the biggest threat to the economy in the year ahead, according to 51 per cent of respondents, followed by less supportive central bank policy (45 per cent), COVID-19 variants (40 per cent) and US-China relations (39 per cent).
“As the survey has revealed, investors are expecting an uphill battle amid volatility caused by the pandemic, rising interest rates and inflation,” said Natixis IM country head for Australia and New Zealand Louise Watson.
“For this reason, we’re seeing a host of investors from superannuation funds to family offices look to longer-term investment options such as private equity.”
Forty-five per cent of fund selectors said they planned to increase their allocations to private equity during 2022, while 47 per cent said they would maintain their existing allocations.
Allocations are also expected to increase towards infrastructure (45 per cent), private debt (35 per cent) and real estate (30 per cent).
“The retreat of central bank stimulus and an emphasis on the reopening trade are causing significant market shifts, which fund selectors expect to continue throughout 2022,” said Natixis IM head of UK sales Darren Pilbeam.
“Investment firms are looking for diversified, strategic allocations to private assets, active management and ESG in response.”
Seven in 10 fund selectors said that ESG was integral to sound investing, while 63 per cent believe that there is alpha to be found in ESG.
Additionally, 37 per cent of respondents said that their firms were actively investing for ESG impact, while a further 39 per cent were considering doing so.
“In Australia, it’s no surprise that ESG will remain a focus and investors will look to make “green” allocation changes. For example, interest in green bonds continues to rise amongst local clients with Mirova being a leader in the industry for this,” said Ms Watson.
Looking at the outlook for markets in 2022, 62 per cent of fund selectors said cryptocurrencies were due for a correction, while 49 predicted a correction for bonds.
Respondents also saw the potential for a correction for stocks (46 per cent) as well as the technology sector (43 per cent).
