“Investor confidence may be returning”, finds State Street survey of European institutional investors

Three quarters of institutional investors in Europe claim they are confident in the ability of their asset manager to navigate the crisis caused by the Covid-19 pandemic, according to new research from State Street Corporation.

Starting in February, market storms have destroyed portfolios with volatility hitting all asset classes. Almost two thirds (66 per cent) of European investors say their ability to meet their short-term investment objectives has been damaged, facing dramatic falls in asset values and funding levels. 

Chief among the operational challenges institutional investors faced during the crisis were securities valuation, liquidity, and timely reporting. However, the majority of investors, 71 per cent, believe they have had strong communications and support from their managers throughout, and 74 per cent say they remain confident in their asset managers to steer a path through the crisis.

Market commentary and strategic views were listed as the most important means of support given by asset managers (75 per cent), followed by economic forecasting analysis (43 per cent) and investment opportunity assessment (46 per cent).

In the long-term, over half of investors still say that they do not expect to miss their objectives.

“The survey findings indicate a slightly more upbeat perspective than many would have expected,” says Joerg Ambrosius, head of Europe, Middle East and Africa at State Street. “With the slowing of Covid-19 cases across Europe and the phased restart of its most impacted economies, it appears that some investor confidence may be returning.”

In order to reach their long-term objectives, around one third of institutional investors would like more support on their investment opportunity assessment, with similar proportions also requesting economic forecasting analysis and timing for action/reaction.

“Reflecting this reality, investors are looking for strong support from their asset managers to navigate the crisis and deliver alpha in support of client objectives,” continues Ambrosius.

“Asset managers now face one of their greatest challenges and will see how well-positioned they are, for a return to the ‘normality’ that awaits us all, as we emerge from this crisis.” 

Nearly half of the survey respondents, 49 per cent, believe asset managers are underestimating the impact and severity of the crisis. The majority of institutional investors and advisors do not anticipate a rapid V-shaped recovery, with 54 per cent saying that economic activity will not return to a sense of normality before the end of 2021. A further 11 per cent predict economic effects to last beyond 2022.