Institutional investors in the UK are increasingly concerned about geopolitical bad actors, seeing them as the primary economic threat for 2024, according to a study by Natixis Investment Managers.
The survey, which involved 500 global institutional investors, including 57 from the UK, managing a collective $23.2 trillion, revealed deep concerns about potential recession and central bank policy errors.
In the UK, 67% of investors foresee an inevitable recession, with only 2% having recession-proof portfolios.
The report highlights UK investors’ bullish sentiment on bonds, private equity, and private debt. Geopolitical risks and fears of consumer spending slowdowns overshadow their economic outlook.
Globally, institutional investors are divided on inflation predictions for the coming year, with 40% expecting continued high levels and another 40% anticipating reductions. In the UK, over half (51%) predict a decrease in inflation, although 60% accept higher inflation as the new normal.
The study also delves into the impact of artificial intelligence (AI) on investment. While 63% of UK investors view AI as a potential geopolitical risk, 77% recognise its ability to unveil new investment opportunities.
Opinions on AI’s future role varied, with the majority comparing it to “Moneyball” for its data analysis capabilities, but concerns remain about AI’s existential threats.
The popularity of private assets has made deal-finding more challenging, with 58% of UK investors finding it hard to locate worthwhile investments. Despite regulatory concerns over private markets, active investment strategies remain predominant, with 71% of current institutional assets in the UK being actively managed.
Furthermore, 65% reported active investments outperforming passive ones in 2023, though there is growing concern about the systemic risk increased by the popularity of passive investments.
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