Bfinance has released its biennial global asset owner survey, identifying the priorities of more than 300 senior investors, with a combined AuM of over USD7 trillion in assets across 39 countries. With rising geopolitical uncertainty, technological opportunities, and a challenging market environment, asset owners are increasingly focused on resilience, impact, and private market opportunities.
Asset owner performance
Only 62 per cent of investors say that their institutions’ investment performance met or exceeded long-term return objectives through the turbulence of 2022-2023. In 2024, however, there’s a slightly more optimistic tone, with the figure estimated to be 88 per cent. While managers in private market asset classes (private debt, infrastructure and private equity) still demonstrated the strongest satisfaction ratings in 2024, satisfaction was significantly lower than in 2022. Investors relayed high satisfaction with active fixed income manager performance, with 83 per cent in investment grade bonds, but only 35 per cent of investors were satisfied with real estate managers – a huge decline compared to 2022.
Investment portfolios
Private markets remain central to investment strategies, with 53 per cent of investors planning to increase exposure over the next 18 months. Infrastructure and private debt are leading areas of interest, capturing 36 per cent and 35 per cent of new allocations, respectively. Notably, interest in secondaries is growing, with 37 per cent of investors boosting exposure as they seek liquidity options within illiquid asset classes. However, satisfaction with private equity managers has dropped significantly from 94 per cent in 2022 to 69 per cent in 2024, suggesting increased scrutiny of GPs.
In private markets, nearly half (47 per cent) of investors expect a reduced ‘illiquidity premium’, expecting this to be lower in 2020-2040 than it was in 2000-2020. Meanwhile, 37 per cent are in the process of boosting exposure to secondaries and more than a quarter of those are new entrants to the space, among other strategic changes.
Equity portfolio diversification is a clear priority, as only 34 per cent of investors expect the largest tech stocks to outperform broader indices in the coming year. Additionally, 34 per cent of investors anticipate more diversification in their equity portfolio in the next one-to-two years across one or more of four lenses: style (22 per cent), size (16 per cent), geography (16 per cent) and stock-level (14 per cent).
Fixed income strategies are gaining momentum, particularly investment-grade bonds, with 22 per cent of investors boosting allocations. In real estate, 62 per cent of investors anticipate a moderate (59 per cent) or substantial (3 per cent) recovery in core real estate over the coming 12 months, following severe dislocation. However, investors’ predictions for property market recovery have no relationship with their asset allocations movements over the next 18 months. Meanwhile, emerging market exposures are declining, with 18 per cent cutting emerging market equities and 11 per cent reducing allocations to emerging market fixed income.
Opportunities and trends
Artificial intelligence continues to present compelling thematic opportunities, with 40 per cent of investors viewing it as a strong investment theme. However, caution prevails, with a predicted market rotation away from large tech stocks. This reflects a growing focus on mitigating tech-related concentration risks through diversified equity strategies and broader AI investments.
Adoption of digital assets and cryptocurrencies remains low, with only 9 per cent investing in them. In 2022 the figure was 8 per cent, and 21 per cent expected, at that time, to have exposure within five years.
Finally, although interest in impact investing is growing, adoption remains gradual. Currently, 27 per cent of investors are engaged in impact strategies, with a further 26 per cent planning to enter this space. 24 per cent of investors will increase exposure to impact strategies. Climate transition remains a significant theme, with 40 per cent of respondents identifying it as a strong investment opportunity. Biodiversity-focused assets are poised for growth, with a projected 200 per cent increase as investors explore nature-based solutions.
Risk management
With 75 per cent of investors emphasising the need to build portfolio resilience, managing risk has become a primary objective. Major areas of concern include geopolitical unrest (54 per cent), prolonged downturns in risk assets (23 per cent), and liquidity risks (19 per cent). Investors are taking diverse approaches, with 22 per cent already using equity overlays and another 9 per cent planning to implement them to buffer against potential equity market corrections.
While investors are more positive on ‘risk assets’ (e.g. equities) than they were in 2022, there is a huge contrast between different institution types: only 4 per cent of DB Pension Funds are underweight risk assets, in contrast with 37 per cent of Insurers. Furthermore, investors are expecting ‘higher for longer’ rates compared to the current economist consensus: the average prediction for the Fed Funds rate at end-2025 is 3.4 per cent, distinctly higher than the 3.0-3.25 per cent figure in an October 2024 Reuters economist poll.
Kathryn Saklatvala, Head of Investment Content at bfinance, says: “The report reveals that in an increasingly uncertain world, resilience has taken centre stage for institutional investors. The focus on managing risks like geopolitical unrest, liquidity challenges, and prolonged market downturns underscores the critical need for robust strategies. From equity overlays to private markets and fixed income, we’re seeing investors actively recalibrate portfolios to navigate these challenges, balancing caution with the pursuit of opportunity in areas such as impact investing, infrastructure, and emerging technologies like AI.”
