According to a recent poll released by Union Investment, German institutional investors expect that on average 43.5% of their peers will fail to hit their investment targets for the coming year.
The pessimistic assessment is particularly pronounced among banks, where 49 % expect their peers to miss the target, while corporate investors anticipate a failure rate of 37.8%.
Investors are quite clearly of the view that low interest rates and the adverse investment climate are here to stay for the foreseeable future,” comments Alexander Schindler, the member of Union Investment’s board of managing directors.
As a result of growing pressures to realise targets, investors increasingly prioritise return over other investment criteria such as safety or liquidity, the study revealed. Only 64 per cent of institutional investors now claim that safety is the most important criterion while 79 per cent of respondents cited it as main factor one year ago.
Alexander Schindler views this as a logical outcome: “The only way to generate higher returns is to take greater risks. The stronger pressure on returns has therefore inevitably increased the willingness to take carefully calculated risks,” he explains.
Nevertheless, loss avoidance topped the priorities list, with 80% indicating that they attached the highest importance to this criterion. However, risk management should not be seen as a purely defensive tool,” stresses Schindler. “Given the pressure on returns, investors are now more concerned than ever to achieve superior risk-controlled performance.”
The Union Investment study is conducted annually, the 2014 research includes views from 109 institutional investors which were polled between April and May 2014.