Fiduciaries’ top concern is US gridlock

Endowments and foundations in the United States are more concerned with the US political and fiscal gridlock than the uncertainty caused by the European debt crisis, according to a survey of non-profit organisations by Mercer Hammond.

Partner at Mercer Hammond, Russ LaMore, says the US situation dominated the global macroeconomic concerns of these investors, followed by the European debt crisis and slowing growth in China.

The survey found that the investors had an “ambivalent” attitude to investment in Europe. On the one hand they thought equity valuations in Europe were too attractive to ignore, but they also wanted their global equity managers to tactically reduce their exposure to the euro, either through asset allocation or the use of currency hedging.

LaMore says the biggest investment risk cited by the fiduciaries was an over-reaction to short-termism.

“Short-termism as a fear was readily identified by respondents,” he says. “The good news is if they are conscious of it then they can address it. Good governing bodies and good governing documents will ensure events are viewed in terms of the statement of investment policy, and not what happened this morning.”

With regard to investment risk, the organisations responded that the biggest concern was fear of losing money, with market volatility ranked second.

These investors typically have large allocations to growth assets, LaMore says, and achieving the targets of their spending rates plus inflation was a big challenge given interest-rate levels.