A global economic slowdown and sharp inflation are the top concerns for global public pension funds and sovereign wealth funds over the next 12-24 months, according to a study by the Forum of Official Currency Financial Institutions.
Respondents in the August-October survey surveyed 13 public pension funds and six sovereign wealth funds worldwide with a combined $3.2 trillion in assets under management. , said it is allocating to alternative assets that provide a hedge against inflation. More than 40% of his funds are considering increasing investments in real estate and infrastructure assets, with many saying they will increase allocations to inflation-linked bonds and commodities.
Market volatility is causing more funds to seek safety in the US dollar. Euros, yen and Swiss francs are also attractive options. However, “for the first time in recent memory,” OMFIF’s survey of global retail investors shows a redistribution from the Chinese yuan.
Financial institutions surveyed do not plan to increase their exposure to the renminbi, with 12% planning to reduce their investment in the next one to two years. This is the opposite of last year, when 11% of respondents planned to increase their exposure.
Pension funds and sovereign wealth funds are primarily concerned about geopolitical tensions between China and other countries, the survey found. However, more than 50% of his respondents cite reduced market transparency, China’s regulatory environment and capital controls as negative factors.
Even if institutional investors invest away from the renminbi, most institutions still invest heavily in China. 97% are invested in China and 83% own Chinese stocks. More than 70% of his respondents said diversification was the main reason for buying Chinese assets.
The OMFIF report said, “For the first time, public investors appear to be less optimistic about China and more defensive.