Investors see asset bubbles in 2018, according to Natixis survey

08 December 2017   Category: News, Asia, Global, Hong Kong, USA, Europe   By Asia Asset Management

Almost two-thirds of institutional investors in a global survey by Paris-based Natixis Investment Managers (Natixis) believe asset bubbles may develop in the stock and bond markets next year.

The investors are anticipating that a decade of low interest rates, low volatility and high investment returns may well be coming to an end in 2018.

The survey – Institutional Investor Outlook for 2018: It's the end of the world as they know it. And they feel fine – found that 65% of investors see the potential for asset bubbles in stocks and bonds.

"With all fixed income investments now subject to the growing possibility of sustained global rate rises, many institutional investors are starting to view current bond market valuations with suspicion," Fabrice Chemouny, head of Asia Pacific at Natixis, says in a statement on December 6.

The findings are based on a survey of 500 institutional investors, including managers of corporate and public pension funds, foundations, endowments, insurance funds and sovereign wealth funds, in North America, Latin America, the UK, Continental Europe, Asia and the Middle East. It was conducted in September and October.

Investors also see plenty of other risks in 2018, including geopolitical uncertainties, potential market spikes, and rising interest rates.

With the anticipation that markets will be riskier and more volatile in 2018, three-quarters of the investors agree that active investment will be the best strategy to capture opportunities in the changing market.

The survey also shows that investors are building investment plans with an average return of 7.2% for 2018, and that 64% do not expect to make changes in their return assumptions.

Their strategies for next year include increasing allocation to non-traditional assets such as private equity, private debt, infrastructure and real estate. In the private equity space, 49% of investors say the technology, media and telecommunications sectors are the most attractive, followed by healthcare and infrastructure.

"Beyond the traditional interplay of fixed income and equities, we’re also seeing many institutional investors seek refuge in alternative investment strategies, as they look to protect and diversify their portfolios while also generating satisfactory returns, Mr. Chemouny says. “Instead of the long-standing hunt for yield, we are seeing an emerging scrutiny of portfolios – and a new hunt for diversification."