According to the quarterly SWFI Global Asset Owner Survey conducted in November 2017, large sovereign funds and pensions take the view that a stock market bubble is currently the biggest tail risk. This is in contrast to our August survey which revealed a blended view of risk including trade wars and U.S. fiscal policy errors. Numerous pundits in Western financial media, post Trump’s electoral win, have called for a stock market bubble; however, many these alarm bells have been ringing since the global financial crisis, and have, thus far, been premature. The quarterly survey targets sovereign funds, pensions, endowments, superannuation funds, foundations, government funds, family offices and other asset owners. Totaled estimated survey sample size was over US$ 2 trillion of assets under management, more than the inaugural survey in August. This round all respondents have a long-term orientation.
Only available for participants and subscribers.
Here are some key findings:
The majority of respondents see long equities as the most crowded trade – specifically in long high-quality equities and long U.S. technology equities.
Investors were right on U.S. tax reform – still biggest driver of equity prices in the next 6 months. Treasury bond yields were a clear second, while oil prices were no longer a driver of equity prices.
Surprisingly, 31.82% of respondents plan to decrease allocation to exchange-traded funds (ETF) in the next 12 months.
Again, a majority of respondents plan to increase allocation to Europe, ex-UK in the next 12 months. In a smaller percentage, some respondents plan to increase allocation to the U.K. as well.
(More Cash to Sit on Sidelines) 41.65% of respondents plan to increase allocation to cash in the next 12 months, versus 33.34% of respondents in August 2017.
Again, a majority of respondents see geopolitical risk as the greatest factor against financial market stability.
According to Michael Maduell, president of SWFI, “Sovereign wealth funds, pensions and superannuation funds have already priced in U.S. tax reform and are growing cautious of a potential stock market bubble.”
Maduell continues, “Geopolitical risks remain a top concern with regard to financial stability for global asset owners. Risks in the Middle East, North Korea and potential political disturbances in the West weigh on the minds of chief investment officers globally. The survey results clearly demonstrate that asset owners are being more selective, holding more cash, while jumping on opportunities in Europe.”
More About the Global Asset Owner Survey
This is SWFI’s second quarterly survey for asset owners. To participate in the next quarterly survey, CONTACT email@example.com.
SWFI intentionally excludes 3rd party asset and fund managers in this survey. As an independent authority on asset owners, SWFI feels that it is uniquely qualified and strategy agnostic to show a true “lay of the land”.
Data Collective led a US$ 15 million Series A round into Salt Lake City-based Fortem Technologies, Inc., a company that works on solutions that can detect, identify and classify drones in real time to maintain airspace safety. Other investors in the round include Boeing, Mubadala Investment Company, Manifest Growth, New Ground Ventures and Signia Venture Partners.
Ibrahim Ajami, Head of Mubadala Ventures said in the press release, ” Mubadala is excited to work with Fortem and its outstanding leadership team to help grow its business to new markets.”
Ajami added, “We strongly believe the TrueView radar is essential to maintain a safe airspace for both the aircraft and the critical infrastructure on the ground.”
The Ireland Strategic Investment Fund (ISIF) and CIC Capital Corporation – a sovereign wealth enterprise (SWE) of the China Investment Corporation – announced the formation of a joint €150 million fund targeting high-growth Irish technology firms looking to expand into Chinese markets, as well as a special emphasis on Chinese companies hoping to set up shop in Ireland as a base for their European operations.
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The Council of Institutional Investor’s spring conference for 2018 – held this week in Washington D.C. at the Omni Shoreham Hotel – was packed with member-hosted panels, where nearly 400 of the top investment professional, regulators, and corporate governance experts gathered together to share their insights and engage in forward-looking discussions on how to drive a multi-stakeholder approach to responsible investment over the long-term.
Sovereign Wealth Fund Institute (SWFI) had the opportunity to attend several breakout sessions, including one presented by Maryland-based Institutional Shareholder Services that sought to address one of the most pressing challenges facing institutional investors today: How can environmental, social, and governance (ESG) criteria help drive voting at the board level? Moderated by Georgina Marshall, Head of Global Research at ISS, panelists provided a diverse array of perspectives on how to harness ESG considerations as an effective decision-making tool.
For Bonnie Saynay, Global Head of Responsible Investments at Invesco, fostering an environment conducive to communication with investment teams using a “player-coach” model is critical. Moreover, Saynay warned investors of thinking too broadly on ESG considerations, and to instead focus in on the criteria that is most important to them as an organization, and to then tailor their stewardship practices to match those priorities: “If everything is important, nothing is important,” she said.
Clare Payne, head of corporate governance for North America at Legal & General Investment Management, highlighted the importance of procuring the latest ranking data from a number of different providers, as well as how to develop one’s own internal system for scoring so as to cut through the clutter and provide a contextualized framework for making investment decisions on your own terms.
Remuneration is the name of the game for Robbie Miles, Vice President and ESG analyst at Allianz Global Investors. Amid the ever broadening scope of influence that responsible investment commands, Miles urged attendees to work with their managers on mandates that link compensation to the long-term performance of the fund, as well as long-term holding periods.
Wrapping up the panel was Stu Dalheim, Vice President of Shareholder Advocacy at Calvert Research Management, advocated for diversity at the board level across a number of different metrics – including ethnicity, gender, and professional backgrounds – in order to reflect the reality of their client base, as well as provide an apparatus for robust debate and adaptation in an ever-changing business environment.
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