“U.S. political and regulatory risks appear to have moved to the foreground for a lot for North American institutional investors, and as a result many have found perhaps temporary refuge in rising stock markets,” Kevin Plumberg, the editor of a new research report by The Economist Intelligence Unit, said in a statement on Tuesday.
Eighty-one percent of North American institutional investors in the research said uncertainty in the U.S. regulatory environment had driven them to reallocate their portfolios to a particular asset class, and for 52% of these, the asset class was equities.
According to the report, sponsored by Franklin Templeton Investments, this suggests that some of the current bull market in U.S. stocks is being driven by tactical investments, rather than by fundamentals-driven decisions.
Plumberg said investors would still need to be ready tactically to stay focused on their long-term goals as near-term risks evolved.
In fact, 47% of investors surveyed said they had become more focused on their long-term goals in response to short-term factors. Only 20% said they had become more focused on meeting short-term objectives.
Low yields and market volatility were the chief reasons some investors had shortened their investment time horizons, increased portfolio churn and reduced investment holding periods. Forty-seven percent said market volatility prevented them from lengthening their time horizons.
The EIU surveyed 571 institutional investors around the world this summer, including 143 North American respondents of which 64% were pension funds, 17% corporate treasuries, 15% endowments and 4% sovereign wealth funds. Twenty-two percent of these had more than $5 billion in assets under management.