The results of the CIO Sentiment Survey broken down into investment impact and themes
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Asset owners are keeping their portfolios in a holding pattern, awaiting information that will enable them to decide how best to shift their allocations in the coming years. The Global CIO Survey found 73 per cent of CIOs planning ‘no change’ in allocation shifts–a much higher proportion than in previous years.
Amid heightened risk, CIOs are re-thinking their various equity exposures. Liquid equity allocations have mostly been kept static, with 70 per cent of CIOs planning ‘no change’ in their active equity allocations. And only 15 per cent are planning a net increase in private equity allocation, as sentiment towards private markets cooled.
While most surveyed funds are in a wait-and-see posture, some are adjusting or planning adjustments around the edges to address inflation. The survey finds 44 per cent of respondents planning to increase real assets exposure, 31 per cent planning to add private credit exposure, and 31 per cent planning to shift equities to more inflation-proof sectors and other value-oriented investments.
Liquid equity allocations are in a holding pattern
CIOs Planning ‘No Change’ in Active Equity Allocations Average,
% of respondents, 2021 2023
When asked to elaborate on approaches to inflation, a number describe tilting more towards fixed income, with some reversing or revisiting earlier decisions to shorten duration in their portfolios. Some are in the process of re-assessing their fixed income allocations. Unconstrained strategies appear to be falling out of favour with higher or similar yields now available on higher quality fixed income.
Active core and core+ allocations are on the rise, with more cautious increases in active high yield due to attractive yields and, in the case of bank loans, floating rates. CIOs are also adding tactically to EM debt to take advantage of high yields, stressing active management due to widely varying country fundamentals. And the data found a small increase in the use of passive fixed income–a low fee source of core exposure that enables tactical duration bets.
Planned Portfolio Changes as a Result of Inflation
Planned Portfolio Changes as a Result of Inflation % of respondents, 2023
Increasing Real Assets Exposure
Adding Private Credit Exposure
Shifting Equities to more Inflation Proof Sectors and/or Value Oriented
Shortening Fixed Income Duration
Reducing Total Fixed Income Allocation
2023 CIO SENTIMENT SURVEY