After the 2013 taper tantrum when the US looked poised to stop its asset-purchasing programme, emerging markets fell out of favour. But a survey has revealed that institutional investors “keep the faith” with the asset class.
The European Asset Allocation Survey by Mercer, an investment consultancy, revealed that institutional investors have maintained their positions in emerging markets, around 6% of assets, despite poor performance since 2013.
“We continue to advocate exposure to emerging markets as part of a well-diversified growth portfolio,” said Phil Edwards, European director of strategic research in Mercer's Investments business.
Another trend the survey highlighted was negative bond yields, which has forced pension funds to look at other assets. The report said there has been a shift away from low- or negative-yielding domestic government bonds towards higher-yielding non-domestic and/or corporate bonds.
The survey also noted that pension plans across Europe were influenced in their behavior due to the “complex” interplay of regulatory constraints, the availability of suitable alternatives and investor risk appetite.
Mercer’s survey is available to read here.
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