Low interest rates are forcing European institutional investors to take on increased risk and adjust their investment safety preferences, with institutions in the Netherlands and UK the least risk averse, and investors in Germany the most by far, a study suggests.
According to Union Investments, 61% of British and 62% of Dutch institutions ranked avoiding losses as their top priority, compared to 75% in Switzerland and 69% across Scandinavia (Denmark, Sweden, Finland, Norway). German institutions are far and away the most cautious at 82%, although this represents a 7% fall year-on-year.
The findings indicate a growing desire among institutions not to fall below an absolute minimum required rate of return, with 47% viewing this objective as important. Again, Dutch and British institutions were more likely to view this as important, with 62% and 65% respectively believing this to be a high priority – far ahead of their German (41%), Scandinavian (50%) and Swiss (40%) counterparts.
A spokesperson for the firm attributed this increased risk appetite to a more challenging hunt for yield, and the need for investors to “climb further up the risk ladder” to achieve returns. Nevertheless, despite this trend, 75% of European institutions still cite avoiding losses as their top investment priority.
Elsewhere, the study found most European institutions are concerned about the future. In the next three years, 60% estimate they will fail to achieve their investment targets. Pessimism runs high in Germany, with 64% believing they’ll miss their objectives. However, only 16% attributed this to low interest rates.
Union Investments surveyed the opinions of 212 institutional investors across eight European countries for the study.
©2016 funds europe
