Australian investors are moving past the market noise of this year’s US election and opting to harness major trends such as deglobalisation, disruption and decarbonisation.
According to a new survey from Schroders of almost 3,000 global investors – including 159 Australian respondents – investors are accessing these trends by increasing their exposure to global equities and private equity.
In a significant shift from short-term economic concerns, local investors have flagged high interest rates (70 per cent), economic downturn and inflation risk (both 68.8 per cent) as top priorities.
Now, almost half (45 per cent) of respondents are highlighting their commitment to their long-term investment strategy, with the majority claiming that active management can help them outperform passive in the current environment (61 per cent).
Simon Doyle, chief executive of Schroders Australia, said the findings signify that investors are anchoring themselves in fundamentals, rather than temporary noise, when evaluating their investment options.
“As an active manager, it is important to understand not only what drives financial markets, but also investor behaviour during periods of change and market uncertainty,” Doyle said.
“The survey also recognises that active management has an important role to play in delivering long-term objectives and in navigating the shifting fundamentals that are characteristic of the current environment.”
Moreover, while almost half of those surveyed expect to maintain their global equity allocation (48.8 per cent) over the coming two years, diversification is also key for investors, as highlighted in the survey.
Namely, Schroders found that macroeconomic risks, such as higher-than-expected inflation or a slowdown in growth (65 per cent), central bank policies (55 per cent) and a liquidity crisis (51.3 per cent) were seen as the biggest threats to fixed income investing.
“In this environment, private credit (48.8 per cent) and investment grade corporate debt (42.5 per cent) were highlighted as the biggest investment opportunities within the fixed income space in the next one to two years for Australian financial advisers,” the firm said.
“Private markets are an essential source of creative and long-term capital to finance fundamental structural shifts in our societies – driven by decarbonisation, deglobalisation, demographics and the AI revolution,” said Georg Wunderlin, chief executive of Schroders Capital.
“Investors are recognising the potential of private assets to drive positive change, and, therefore, higher returns.
“Following shifts in the rate environment, private market investments are at a pivotal moment. What is required in the future is even deeper skills of managers to source, execute and manage private assets.”
