AllianzGI Survey: Geopolitics Now Top Concern Among Global Investors

Sep 6 2017 | 11:48pm ET

Geopolitical concerns are weighing heavily on investors’ minds, according to a new survey from alternative investment manager Allianz Global Investors, and forcing them to reassess risk management and return expectations.

In the survey of global institutional investors, geopolitics now ranks as the number one concern, ahead of rising interest rates or fears about an economic slowdown. It is the first time since the survey’s inception in 2013 that geopolitics dominated the list of risk factors. 

For its annual RiskMonitor survey, AllianzGI polled 755 global institutional investors representing some $34.2 trillion in AUM across North America, Asia-Pacific and Europe during April and May 2017. Of the group, fully 44% say that geopolitics represent a major risk to investment performance – ahead of a global economic slowdown (41%) and rising interest rates (32%).

“This study highlights the extent to which geopolitical uncertainty, including the ongoing tension in North Korea, is weighing on investment decisions,” said Neil Dwane, global strategist at AllianzGI, in a statement. “Financial markets have never operated in a vacuum, but geopolitics now appears to be having a greater impact than at any point in recent memory on how global investors are behaving.

The survey also revealed that 31% of the investors polled believe U.S. politics is an investment concern. The question on investors’ minds is whether markets have priced in all of the risks, the statement added. For instance, event risk and equity market risk have also risen sharply up institutional investors’ agenda over the last 12 months, the survey revealed. Details:

  • More than 9 in 10 investors (91%) see event risk as a threat, compared with only three-quarters in 2016
  • Equity market risk has taken a similar prominence, weighing on the minds of 90% of investors (2016: 77%)
  • Nearly 3 out of 5 investors (59%) claim that recent political events have led to an increased emphasis on risk management in their institution.
  • Two-thirds (65%) of investors say that actively managed investments play an important role in portfolios in the current market environment.
  • Investors face a risk-return conundrum as they seek to optimize the risk-return trade-off in uncertain markets. This caution is reflected in return expectations for the coming year, with more than half (51%) lowering their targets despite a strong recent performance by equity markets 58% looking for new portfolio strategies that balance the risk-return trade-off.
  • Revealingly, 53% are willing to sacrifice upside potential in order to have tail-risk protection.
  • 31% cited the diversification value of alternative assets as the single most important reason for investing in alternatives – ahead of any other factor.

Allianz Global Investors oversees some €34 billion in alternative assets (including equity long/short, merger arbitrage, derivatives, volatility, global macro, absolute return, private debt, and infrastructure-related equity and credit strategies) on behalf of institutional and retail investors. Part of German insurance giant Allianz, the firm as a whole manages more than €498 billion. 

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