Return assumptions drop amid market uncertainty – Natixis IM

Professional fund selectors have become more pessimistic in their forecasts for 2024, thanks to ongoing market uncertainty and escalating global tensions, suggests recently published research.

According to a survey of 500 investment professionals across 26 countries undertaken by French firm Natixis Investment Managers, fund selectors have dropped their long-term return assumptions by 28% in comparison to the previous year (6.3% compared to 8.8%).

The threat of recession remains the top concern among investors, as cited by 52% of respondents.

Natixis: European advisers still bullish about 12-month growth outlook

This was followed by (52%), followed by the threat of war and terrorism (50%), and a central bank policy error (36%).

The survey also shows that investor sentiment has become more negative towards China with 64% believing that China’s economic malaise will continue in 2024.

The majority of fund selectors (69%) also believe that valuations still do not reflect market fundamentals, while 65% expect stock market volatility to continue and 60% see the greatest risk coming from stagflation.

Investor sentiment leaning towards risk aversion – study

The survey does also show some optimism among investors and fund selectors. While there are fears of a recession, 56% remain positive about this year’s market performance and 62% expect their economy to experience a soft landing from any downturn.

In addition, Asia ex-China is ranked as the top prospect by 48% of respondents.

The market uncertainty has also led to a revival of sorts for active management. The survey shows that 58% of respondents reported that their active funds outperformed passive funds in 2023 and 68% of fund selectors say markets now favour active managers.

Active ETFs see record inflows during 2023

“It is clear that fund selectors expect the 2024 investment landscape to be anything but normal,” said Darren Pilbeam, head of UK sales at Natixis IM.

As a result, fund selectors are looking to provide investment strategies that will see clients through a volatile year and not just satisfy their immediate demands, said Pilbeam.

“In equities, selectors are counting on large caps to carry them through what could be a turbulent year, and are lengthening duration on bonds to capitalise on the rate environment,” said Pilbeam.

“Private assets and active management are also increasingly coming to the fore for selectors, as they seek to protect portfolios in a challenging year.”



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