A new report by State Street and the International Forum of Sovereign Wealth Funds finds institutional investors are turning to less risky markets and assets. The report analysed the activity of long-term institutional investors with over $43 trillion in AUM and administration at State Street.
Large institutional investors are shifting capital to less riskier markets and assets. The outflow is broad and has taken place across equity, foreign exchange, and fixed income.
Emerging markets fixed income outflows were strong, the report revealed, owing to increasing geopolitical risk. On the other side of these outflows are stable inflows in foreign bonds from developed markets.
Neill Clark, head of State Street Associates, Europe, Middle East and Africa: “As economies around the world emerged from the long shadow cast by the Covid-19 pandemic, investors are faced with new risks. Today, risk assets are re-pricing due to international conflict, inflation, and central bank policy responses. Following a period of opportunistic rebalancing and selective risk-taking during 2020, the past year has seen institutional investors moving towards safer assets and markets. Their asset allocation decisions suggest they are no longer adding to their equity exposure – which they had been doing since Q1 2020 – and instead, are adding to their fixed income and cash balances.”