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Chaotic Markets, But Happy Clients

Three out of four allocators professed faith in their managers in a recent survey.

Investment firms had earned their clients’ approval through the Covid-19 crisis, even before markets dramatically bounced back, State Street found in new research. 

Three-quarters of 250 institutional investors surveyed in April said they have faith in their managers’ ability to navigate the fraught situation, with a similar portion reporting strong communication and support from those service providers. 

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Most of the polled investors did not anticipate a swift, V-shaped recovery this year. Two out three said that economic activity would return to full strength in 2021 or later. 

Stock markets, of course, have bounced back far faster than that. The S&P 500 index was less than 200 points away from all-time highs on Tuesday afternoon, while the Nasdaq Composite flirted with the 10,000 threshold. 

Yet polled allocators professed optimism at much lower markets in State Street’s April survey. Most (64 percent) had expected to miss their short-term targets, but 56 percent believed they would still fulfill their long-term return goals.

“Covid-19 took both investors and managers by surprise,” John Lehner, global head of State Street’s asset manager segment, said in a statement. “Despite concerns about managers’ ability to predict the impact of the crisis and the hit it might have on short-term investment objectives, it is also clear that there is strong support for asset managers to navigate the crisis and deliver returns in the long term.”

If the 52 percent of investors who planned to allocate more to equities as of April did so, many would already have attractive returns to report. The next most popular allocation targets, according to the survey, were active strategies and private credit (both at 35 percent) and cash/money market funds (31 percent). 

The polled investors work at university endowments, foundations, pension funds, insurers, and other institutions, and responded to State Street via survey contractor Core Data. 

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