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55% of institutional investors feel that high inflation is structural

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High inflation worries investment managers more than previously thought. According to a recent survey of Natixis Investment Managers Among 500 institutional investors from 29 different countries (managing $ 13.2 trillion), seven out of ten managers say rising inflation is the main risk to portfolios. 55% believe that the rise in prices is structural, by 45% who see it as cyclical or transitory.

The causes are well known to the financial sector: “a combination of flexible monetary policy and low interest rates”. With regard to the latter, 64% also mention them as portfolio risk to take into account, in an environment in which increases are coming in 2022 or 2023 after a decade depressed at 0% or even in negative territory .

To mitigate the increased volatility that will be next year and aspire to higher returns at the same time, managers are increasingly turning to alternative unlisted assets. The Natixis survey reflects that, in 2021, an 84% of the professionals already invests in venture capital, 81% in private debt and another 81% in infrastructure.

By sectors, they see as the most attractive for 2022 the information technology (with 45% of the responses), health care (41%), infrastructure (40%) and energy (34%).

However, less than half of those surveyed (45%) believe that private assets will provide a safe haven in the event of a market correction, as private markets continue to rise to record levels. In fact, 69% are concerned that entities have taken “too many risks in their quest for performance.”

More crypto assets

That is, the illiquidity premium that these assets give goes from being an advantage to a disadvantage if everyone is involved in them at the same time, a bubble having been created, and there is a strong downturn in the real economy and financial markets , leaving a good trail of ‘caught’ investors.

Crypto assets are also part of this alternative world. 28% of institutional investors acknowledge that they are already investing in cryptocurrencies, and four in ten believe that a digital asset is a “legitimate investment opportunity.”

“Most institutional investors see the end of the long bull market once central banks withdraw support measures. In general, entities look towards 2022 with optimism. But high volatility in the equity market, rising inflation and interest rates keep investors on their toes, increasingly pushing them to make more tactical assignments to navigate the current environment, ”explains Andrew Benton, Responsible for the North of Europe of Natixis IM.

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