Institutional investors anticipate a year of dramatic change in 2017, according to a study by Natixis Global Asset Management.
Natixis recently released the investment outlook of 500 institutional investors from around the world who manage corporate pensions, public pensions, sovereign wealth funds, insurance funds as well as endowments and foundations.
Market volatility topped the list of concerns for 2017, with 65% pointing to geopolitical events, 38% citing the U.S. elections, and 37% noting the potential for changing interest rate policies as the top sources of volatility for 2017.
“Unprecedented economic and political forces around the world are the top concern for institutions in 2017,” John Hailer, CEO of Natixis Global Asset Management for the Americas and Asia and head of global distribution, said in a statement.
Brexit, a Donald Trump presidency and Italy’s no vote on constitutional reforms are “emblematic of the forces of change” that could contribute to heightened volatility, according to the Natixis study.
However, these events are likely just the start of geopolitical volatility around the world. Elections in France, Germany and the Netherlands – where populist sentiments are running high – are still to come in 2017. In addition, the outcomes of political upheaval in South Korea and Brazil, as well as Britain’s plan for invoking Article 50 to leave the European Union also add to uncertainty across the globe.
The responses also showed that institutional investors’ confidence suffered after the U.S. election. Natixis conducted the survey in two stages, with 340 investors polled just before the U.S. presidential election on Nov. 8 and 160 responses collected just afterward.
Prior to the election, two-thirds of respondents expressed confidence in their organization’s ability to handle the risks associated with investment performance, which fell to 53% among those surveyed after the election.
The outlook for U.S. and emerging market stocks also changed substantially after the election.
Forty-three percent of investors surveyed before the election said emerging markets would be the best-performing equity market in 2017 compared with 31% of those surveyed after the election. Meanwhile, 46% of those surveyed before the election said the U.S. would be the biggest disappointment among global stock markets, compared with 31% of those surveyed afterward.