Institutional investors have reasonably strong expectations for 2013, according to a new survey by Commonfund.
Investment portfolios are expected to grow an average of 7.6 percent in 2013 and an average 7.4 percent over the next five years, the survey shows.
More than 200 investors with a total of $123 billion in assets responded to the survey, which was compiled by Commonfund, a Wilton investment firm that deals primarily with institutional investors, such as pension funds and endowments. The company manages $25 billion in assets annually through its capital and asset management subsidiaries.
“Participants continue to be net positive about 2013, reflecting a sense of stability in the U.S. and abroad,” said Verne Sedlacek, Commonfund CEO, in a statement. “The data shows overall concerns about downside risk have been reduced since last year, although respondents are still very worried about achieving their investment return goals.”
Among the institutional investors who were surveyed, the consensus estimate called for the Standard & Poor”™s 500 index to increase in value by 7.9 percent in 2013.
The spread of expected performance was much wider this year than in the previous year”™s survey. About 20 percent of respondents said they expect a return of less than 5 percent from the S&P 500, while 30 percent of respondents said they expect a return of more than 10 percent.
The three-year projection for the S&P 500 fell slightly compared to last year”™s survey responses.
When asked about what tail risks could disrupt investments, respondents showed a decreased concern about the financial crisis in Europe and an increased concerned about the gridlock in Washington politics.
With the survey conducted between Feb. 28 and March 8 ”” when unsuccessful discussions were at their height over how to avoid the sequestration budget cuts ”” 38 percent of respondents said Washington gridlock over the U.S. debt was the most significant economic risk, compared to 23 percent in 2012.
The European debt crisis, which was seen as the biggest risk last year, sharply declined as a perceived risk. Only 11 percent said it was a leading concern.
When it comes to how assets are managed, nearly all investors surveyed, 93 percent, acknowledged market volatility has a concern. The number was virtually the same as last year.
However, there was a general decrease in concerns overall. Many respondents were less worried about deflation, portfolio liquidity, portfolio tail risks and portfolio complexity. On average, 10 percent fewer companies reported a concern over each subject.
Nine in 10 respondents still worry they won”™t meet their investment goals, however.
Continuing previous trends, confidence over emerging markets continued with 78 percent of respondents expecting the MSCI Emerging Markets Index to outperform the S&P 500 Index over the next three years. In comparison, only 27 percent of respondents expect commodities, measured by the Dow Jones ”” UBS Commodities Index, to outperform the S&P 500 Index over the same time period.
