Investors are more worried about the immediate impact of geopolitical conflicts on the financial landscape than anything else, according to a new survey.
New York-based exchange-traded fund (ETF) specialists WisdomTree commissioned a 2022 summer survey of 600 UK-based professional investors with interests in Europe to find out which of the many emerging global challenges is most concerning.
Independent global market research consultancy firm CoreData Research recorded feedback from sources including wholesale financial advisory firms, wealth managers and family offices, with a combined estimated €710 billion in assets under management (AUM).
The headline finding was that seven in ten (71%) feel geopolitical conflicts are the biggest risk facing investors over the next 12 months.
WisdomTree director of commodities and macroeconomic research Nitesh Shah said: “The war in Ukraine remains front of mind for many investors while the potential escalation of tensions between China and Taiwan adds to the uncertain and tense geopolitical landscape.
“The headwinds facing investors’ portfolios this year have felt relentless, and with no clarity on how long the risks being faced will last investors need to prepare for more uncertainty.”
The second biggest (63%) concern for respondents was a global recession, while the third (62%) was the closely-linked spiralling rates of inflation, where rates have doubled in 37 of 44 advanced economies over the past two years.
Over half (59%) predict inflation will peak in 2023, and 46% think it will reach just shy of 16%.
It has all predictably hit confidence, with 60% of those polled revealing their clients now want to take on less risk across portfolios.
In preparation for higher inflation, those surveyed said they intend to allocate more to equities. But interestingly, the feedback suggested a cooldown on interest in commodities, which are known to have inflation-hedging properties.
The results also suggested an increase in ESG allocations over the next 12 months – with the caveat that if inflation remains high, they could be dropped for strategies proven to be inflation hedges.
WisdomTree director of quantitative research Pierre Debru said: “Delivering returns in the current environment is particularly challenging, with stock markets and bonds suffering deep losses this year.
“Investors need to think about assets that will help protect their portfolios now and allow them to benefit when the market turns.”
© 2022 funds europe
