During this period of extreme market volatility brought on by the coronavirus pandemic, institutional investors are holding on to their positive long-term outlook, Greenwich Associates reported last week.
The Greenwich Investor Resilience Index showed that investors were not yet concerned that the pandemic and resulting social and economic aftershock would significantly affect their ability achieve portfolio goals over three to five years.
The long-term mean score on March 25 was 8.1 on a 10-point confidence scale; responses ranged from 6 to 10.
As for the rest of 2020, however, investors had a much grimmer view. The index showed that confidence in their ability to achieve portfolio goals this year has already plummeted.
The short-term mean score on the same scale was 4.9, with responses ranging from a low of 1 to a high of 9.
Greenwich questioned whether institutional investors’ long-term outlook was naïve. Would funding levels and short-term cash requirements prompt them to make decisions that could make longer-term recovery much more challenging?
Or would asset managers and consultants be able to keep clients on the straight and narrow by reminding them that “this too shall pass” and providing short-term advice?
Greenwich asked institutional investors what information they wanted to hear from their asset managers about the COVID-19 outbreak.
Sixty-nine percent of investors said they needed to understand the effect of the crisis on specific investments, and how the investment strategy is likely to perform going forward.
Half of investors wanted to know what their managers were doing to ensure business continuity in these challenging times.
Greenwich said managers should give clients regular updates about the steps they have taken to ensure business continues now that nearly all employees and critical counterparties are working from home and adjusting to a new virtual environment.
Thirty-eight percent of investors were looking for historical comparisons and data on how markets should respond in uncertain times.
A quarter of investors wanted general information about the coronavirus and its effect on markets. Do pre-existing investment guidelines and principles remain reasonable? Are any short-term shifts required?
According to Greenwich, managers can use their macro research capabilities to provide data, and commentary can help position them as strategic partners to now-vulnerable key decision makers.
Nineteen percent of investors sought perspectives on broader portfolio-wide issues.
Greenwich said managers can deploy their broad range of capabilities as a way to position themselves as trusted partners — “the goal, of course, is to be on investors’ speed dial rosters when issues arise.”
— Check out Greg Valliere: Turning Point in Coronavirus Crisis Is Near on ThinkAdvisor.