Among those surveyed, 91 percent of institutional investors said
they expected to hit their targets in five years, up from 65 percent
in 2012, according to the 2014 Pyramis Global Institutional Investor
The survey also showed that institutions globally are embracing
stocks and bonds, while alternatives such as hedge funds are losing
their luster for U.S. investors. The confidence in stocks and bonds
came even as market volatility remained the top concern for
institutions, with 22 percent citing it as such.
Many view alternatives as favorable in a volatile market on the
premise they offer returns that are "uncorrelated" to traditional
stock and bond markets.
The survey covered 811 institutional investors in 22 countries
overseeing more than $9 trillion in assets.
Institutional investors "are looking for more simplicity, and
they're finding that they're able to generate the types of returns
that they need for their plan participants with this more
traditional asset allocation," said Pam Holding, chief investment
officer at Pyramis.
The greatest percentage of U.S. respondents, 44 percent, said
alternatives such as hedge funds were not worth the fees.
The Pyramis findings come after Calpers, the largest U.S. pension
fund, said in September it would pull out all of the $4 billion it
had invested in hedge funds because they were too costly and
Faith in stocks and bonds was strong enough that 43 percent of
global respondents said they would increase their stock exposure if
equity markets plunged 20 percent or more. A dominant portion of
respondents, 25 percent, said a traditional mix of stocks and bonds
would prevail in the next 10 years.
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While a spike in interest rates was viewed as the top risk for 23
percent of global respondents, 30 percent said they would maintain
the same exposure to bonds if rates rose 1 percent or more, but
would further diversify their bond investments.
Worries about a correction in stock markets worldwide and a spike in
U.S. interest rates have loomed over financial markets this year.
The Federal Reserve is expected to raise interest rates from
rock-bottom levels next year.
The survey also showed that current funded status was the top
concern among U.S. institutions in particular, and 51 percent of the
U.S. respondents expect volatility and the frequency of financial
crashes and market bubbles to stay the same.
Asset manager Pyramis conducts the survey of institutional investors
once every two years. The survey included 281 private-sector
pensions, 173 public pensions and 126 financial institutions.
(Reporting by Sam Forgione. Editing by Andre Grenon)
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