Survey Shows Geopolitical Risk Tops Pension, Asset Managers’ Concerns

Institutional investors are split over how much risk central banks present.

Institutional investors see geopolitical stability as the biggest short- to medium-term risk to the global economy, more than inflation, growth rates, and central bank policy combined, according to a report from asset manager PineBridge Investments.

In a survey of pensions, consultants, and asset management professionals, PineBridge found that 55% of pension professionals, and 54% of asset managers, saw geopolitical risk as the biggest threat to the economy.

“The results surprised me, as I believe geopolitical risk is currently quite low by recent standards,” said Steve Cook, co-head of emerging markets fixed income at PineBridge Investments, in a release. “Presumably, respondents are nervous with regard to Korea, Iran, and other potential flashpoints.” 

However, after geopolitical risk, asset management professionals saw things somewhat differently than their pension professional counterparts. Asset managers were far more concerned about central bank policy as a risk to the global economy than pension fund decision-makers. The survey said 25% of asset managers saw central bank risk as the biggest risk to the economy, compared to only 7% for pension professionals. Inflation was seen as the biggest risk for 20% of pension professionals, while only 11% of asset managers agreed; 16% of pension professionals cited growth rates as the biggest risks, compared to only 5% for asset managers.

“It is likewise interesting that pension fund professionals are far more sanguine about the risk posed by central bank policy to the global economy than asset managers,” said Cook. “In my opinion, the biggest risk to the global economy is ‘central bank policy,’ given that the huge stimulus measures that followed the financial crisis are gradually being wound down.”

Investment strategy and philosophy (55%) is seen as more important than investment performance (32%), according to the survey. Meanwhile, 8% of respondents said commitment to diversity and/or sustainability was the most important fact, while 4% named the most important factor as brand name.

“It’s a positive stance because, ultimately, they are backing and buying the manager’s approach,” Hani Redha, portfolio manager, global multi-asset performance, said of strategy and philosophy being seen as most important. “Performance, by contrast, can be skewed and needs to be scrutinized over the long term to yield meaningful signals. Short-term performance can tell you very little.”

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