Fidelity evaluates new results from its most recent Institutional Investor Study and offers research and insights to help institutions navigate a profoundly changing backdrop.
For over 20 years, Fidelity has been surveying U.S. institutional investors on their ongoing investment approaches, portfolio outlooks, and views on the current market environment.
Our most recent study underscores that allocators may be at a crossroads marked by rising rates, higher inflation, and more volatility. These changing conditions could be a wake-up call for institutions to take action and rethink their investing approaches. But will they ultimately adapt to the new landscape?
Key Insights
- Fidelity's Asset Allocation Research Team believes we are in a new investment regime marked by higher interest rates, higher inflation, and higher asset volatility than we have been accustomed to over the past 20 years. Extrapolating past trends into the future is unlikely to be an effective approach to investing given shifting market dynamics and evolving risks.
- The Fidelity Institutional Investor Study shows that institutions have not significantly changed their approaches to strategic asset allocation, alpha generation, or risk management. The results may reflect institutions' uncertainty about what they should be doing with their longer-term investment frameworks given the new regime, while some may not have conviction about making deeper changes.
- Many institutions reported some tactical shifts, but said they face continued challenges addressing both the tactical and strategic implications of the new regime. The survey results raise the question: Do institutions have their strategic allocation in order given this changing landscape?
- Asset allocators should keep in mind that the risk landscape is not new but is evolving based on a new set of variables (e.g., escalating global debt and productivity). Respondents felt more prepared to address inflation and low growth, but less able to address geopolitical tensions and high valuations. Institutions need to adapt accordingly—both for short-term risks and long-term risks, which may require adjustments to strategic asset allocation.
- The survey showed mixed sentiment on market beta, while views on opportunities from active management are much more skewed to positive. Yet, expected allocations to active strategies have not increased (27%). We also see opportunity in multi-asset inflation protection while survey results showed a significant increase in allocations to real assets.
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About the study
Fidelity's most recent Institutional Investor Survey polled chief executive officers, chief investment officers, treasurers, and other investment executives at 500 institutions in the U.S. Note, the exhibits in the report reflect the views of investment decision-makers, and therefore includes responses from public/private pensions, insurers, endowments and foundations, and family offices; but excludes responses from defined contribution plan sponsors. At the time of the survey, these institutions represented $12T (USD) in assets under management, across public sector defined benefit plans, corporate defined benefit plans, insurance companies, defined contribution plan sponsors, endowments and foundations, family offices, private banks, and sovereign wealth funds. Respondents were asked a range of questions about their portfolio objectives, market perspectives, asset allocation, investment philosophy, and investment process. Fidelity Asset Management Solutions (FAMS) conducted the survey in May and June 2023. The survey was executed in association with global research consultancy CoreData Research. All respondents completed an online questionnaire, which was then supplemented by 10 in-depth qualitative interviews with survey respondents at pensions, as well as with endowments and foundations.