Most institutional investors expect there to be minimal impact on their business from the coronavirus crisis, even though three in ten say their daily investment-related operations were disrupted by the volatility. These are the key findings of State Street’s ‘Volatility Study 2020’ – seen exclusively by investmentofficer.lu – which surveyed 640 mainly insurance and pension funds in April.
Of the other longer term impacts, 14% of those polled predicted headcount reductions, 10% increased technology or operational outsourcing, while 7% think they will need to restructure internal organisation or governance.
Two-thirds of institutions faced just one or two challenges related to their investment operations during the crisis, with just 14% having had no issues at all in this area. Concerns with securities valuation (37%), liquidity (34%), timely reporting (34%), and cash forecasting (30%) were the most common. Trade execution (19%) and reconciliation (18%) were less of a challenge.
Risk-on
As for their investment stance, the survey painted a clear risk-on picture with half of those surveyed expecting to increase their exposure to equities by the end of Q2 or Q3. Only 16% are planning a reduction, leaving a balance of +35.
There was also a positive balance for the following investments: private credit (+27), money market funds (+25), private equity (+10), and infrastructure (+6). But for real estate, 17% predicted reduced allocations, with just 10% foreseeing an increase, and there was a 4-point negative balance for fixed income.
Overall, two-thirds are confident in their asset managers’ ability to navigate the crisis. However, the same proportion also was found to believe their institution will fail to meet short-term investment objectives as normal economic activity is thought not to have returned by the end of this year.