Where Are Big Investors Putting Clients’ Money in the Current Turmoil?
Although global institutional investors, which include retirement funds, insurance companies and wealth managers, may have access to assets largely unavailable to most retail investors, such as private equity and private debt, it is insightful to get an idea of where they invest their clients’ money.
The investment professionals at these firms have a fiduciary duty to clients to optimise returns without exposing them to undue risk. Thus their investment decisions offer helpful takeaways for investors who may be distracted by the noise generated by the financial media.
The world is experiencing heightened geopolitical uncertainty, which has caused an uptick in market volatility. US President Donald Trump’s “Liberation Day” tariff threats on dozens of countries caused a spike in the Volatility Index (VIX) and the deepening crisis in the Middle East has only made matters worse.
The recently published Schroders Global Investor Insights Survey shows that, although the equity markets continue to feature strongly in generating returns, the main priority for institutional funds is portfolio resilience.
The survey, which encompassed 995 institutional investors and wealth managers globally with a combined US$67 trillion in assets under management, revealed that managers were leaning in favour of active rather than passive investment strategies in navigating the turbulence.
In response to the question “What are your priorities in your investment portfolio for the next 12 to 18 months?”, 55% of the investors surveyed indicated that “portfolio resilience” was their top priority, and of these 82% said they were increasingly looking to harness active strategies.
When asked about their top global concerns in 2025, “tariffs and protectionism” was ranked first by 63% of investors. Continued US foreign policy uncertainty was a leading geopolitical concern for 55% of the respondents, and nearly one in four expected greater volatility in the next 12 months than during the Covid-19 outbreak in 2020 and the Global Financial Crisis in 2008.
The survey also reflected the ongoing shift among institutional investors from public to private assets in the equity and fixed-income spaces. Public equity (46%) and private equity (45%) were cited as the preferred asset classes for return generation in the current environment, and private debt was the most attractive allocation option for 44% of investors looking to generate income.
Interestingly, investors are looking to decrease their exposure to the mega-cap shares dominating the US equity market while increasing exposure to equities outside the US. Almost all (94%) respondents indicated they were worried about market concentration, and the resulting trend is towards global diversification. Out of those respondents who favoured public equities for the best returns, 51% of them highlighted global equities, significantly ahead of regional (29%) exposures. Among the latter group, Europe (64%) and the Asia-Pacific region (56%) are preferred over the US (30%) – a significant turnaround from investor sentiment in recent years.
Almost three quarters (74%) of investors cited the S&P500 (the index of America’s 500 largest companies) as the greatest cause for concern about concentration risk. With the S&P500 making up 60% of global capital markets but representing just 30% of global GDP, investors are in search of growth in underrepresented sectors, the Schroders report says. The MSCI World Index (representing all developed nations) was identified by a third of respondents as a source of concentration risk, likely due to its heavy exposure to the US.
Johanna Kyrklund, Group Chief Investment Officer at Schroders, itself an active manager, said: “In a world defined by fragmentation and flux, investors are recalibrating. This year’s survey finds that investors’ top priority is to build resilient portfolios that can adapt and thrive through structural change. Investors are embracing active global equity strategies while also accessing specialist areas such as private equity and private debt and credit alternatives. The goal is to build diversified engines of return that can avoid concentration risks and offer exposure to long-term growth themes.”
