Investor appetite for risk remains high although the growth
rate has slowed down, according to a new survey by ING
Investment Management (ING IM).
The firm cited factors such as concerns over China, tail risk
and, most of all, removal of QE or fiscal shock, which was
cited as the main worry.
Some 42% of institutional investors said that their appetite
for investment risk had increased over the past six months,
but 19% said it had fallen in QI 2014. The corresponding
figures for Q4 2013 were 56% and 11%.
More than a quarter (27%) of institutional investors said
that they had significant concerns about a hard landing in
China compared to 14%in Q4 2013. The corresponding figures
for tail risk were 27% and 11%.
"Despite there being some considerable political, social and
economic issues facing the world today, investors view many
of these as known risks or they don’t perceive
them to be systemic," said Valentijn van Nieuwenhuijzen, head
of strategy multi-asset at ING IM.
"Problems in Europe for example remain, but the situation has
calmed down in recent months so few now expect the EU to
collapse. The potential outcome around the crisis between
Russia and the Ukraine is less clear, and this will add to
investor nerves and adversely affect their appetite for
Over the past year 67% of investors said they had put in
place measures to control risk including increasing
diversification. Some 30% have reduced exposure to risky
asset classes, 16% have increased their cash holdings and 15%
have increased their exposure to 'liquid’
According to ING, investors still have a huge appetite for
equities and an increasing one for commodities. The majority
(70%) of investors surveyed said that equities, while 17%
said commodities, were the most attractive asset to invest in
over the next three to six months.
There is also an increasingly positive attitude towards
emerging market equities. More than half (51%) of investors
believed that the performance of emerging market assets will
improve over the next three to six months, against 22% who
thought it would fall.
Geographically, 30% of investors said the US offered the best
risk/return, followed by 24% that said the UK, 18% said
emerging markets and 13% said Europe.