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The survey, carried out by independent research firm CoreData Research, consulted 600 professional investors across Europe, ranging from financial advisory firms to wealth managers and family offices. The investors consulted are responsible for approximately €710 billion in assets under management.

For Spanish professional investors, inflation (52%) and geopolitical conflicts (46%) are the second and third biggest risks investors face. The top three risks indicate that investors are in a delicate balance to protect their portfolios in the current environment.

Nitesh Shah, Head of Macroeconomic Analysis and Commodities for WisdomTree Europedeclare the following: “The risk of a global recession adds to the panorama of uncertainty and geopolitical tensions. The hurdles facing investors’ portfolios this year have been relentless and, with no clarity on how long the risks they face will last, investors need to prepare for more uncertainty. Since they don’t like insecurity, the sentiment is currently very risk-averse, as central banks seek to contain inflation and governments try to stimulate economic growth and deal with conflicts and geopolitical tensions.”

The survey reveals that half of Spanish professional investors anticipate that inflation will continue to rise before reaching its maximum in 2023. Of the 50% who believe that it will reach its maximum in said year, 26% believe that it will be in March and one of every five (20%) do not believe that it will reach its maximum until June 2023. Consequently, 8 out of 10 Spanish professional investors (82%) think that the reference rates of the European Central Bank will increase up to 2% in the term of one year.

It is not surprising that concerns regarding the macroeconomic and geopolitical environments are being reflected in the risk-taking predisposition of its clients. During the last twelve months, almost two-thirds (64%) of clients in Spain have reduced their exposure to risky assets, despite the fact that more than a quarter (26%) still feel comfortable with the same level of risk.

Pierre Debru, Head of Quantitative Analysis and Multi-Asset Solutions for WisdomTree Europe, add: “Generating returns in the current environment is particularly challenging, as equity and bond markets suffer deep losses this year. Investors need to think about assets that help protect their portfolios and allow them to benefit when the market rebounds. There are still tools investors can use to seek downside protection, weather the storm, and grow long-term. High-quality and profitable companies, combined with strong dividend-paying credentials, appear to meet most requirements.”

Allocations change in response to macroeconomic climate

In response to the volatile and inflationary environment, professional investors have been revaluing the allocations in their portfolios. In order to prepare for even higher inflation, almost two-thirds (62%) of Spanish professional investors seek, or already have, exposure to equities, which is a significantly higher figure than the assets that have historically been better protection against inflation, such as gold (28%), commodity baskets (38%) and inflation-linked bonds (54%). Of those who already invest in commodities (44%), 8 out of 10 (82%) do so for diversification purposes and 55% as a hedge against inflation.

Recognizing the difficult economic environment, only 30% of Spanish professional investors expect to increase their exposure to investment strategies focused on ESG criteria during the next twelve months. If inflation remains high, 68% of investors said they would consider reducing their exposure to ESG strategies in favor of strategies with a good track record of protecting against inflation.

reference: assetmanagers.estrategiasdeinversion.com

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