- Around a third of those who expect a correction believe it will be up to 30%
- One fifth (20%) of those who have already adjusted their portfolios in anticipation of a correction have raised exposure to asset-backed securities
Seven out of 10 (71%) institutional investors anticipate a global equity market correction of more than 10% within 18 months, including nearly half (47%) who expect it to happen within a year, according to new research by Managing Partners Group, the international asset management group. Only 12% expect no correction at all.
Around a third (32%) of those who anticipate a correction expect it will be up to 30%. Over a third (36%) expect a drop of between 10% and 15% and nearly another third (28%) expect the fall to be between 15% and 20%.
The most likely reason for a slump is a run on equities sparked by fears they are overpriced, which was cited by 37%. Other reasons include a black swan event (33%); a geopolitical crisis such as North Korea (27%); a rise in interest rates (25%); a financial crisis in China (24%); the cessation of quantitative easing (18%); a financial crisis in Europe (16%); western governments’ excessive debt (6%); and a collapse in bond markets (4%).
While a fifth (20%) have already adjusted their portfolio another 37% plan to do so in the near future. Of those who have adjusted, 90% have reduced their exposure to equities and 30% to fixed income. Two out of five (40%) have raised their exposure to cash, 50% to alternatives such as hedge funds and 40% to real estate.
Jeremy Leach, Chief Executive Officer, Managing Partners Group, commented: “Equities are looking highly valued on both sides of the Atlantic and it looks as though the market is just looking for an excuse to correct.
“Our research shows that a substantial proportion of investors now expect this to happen and many have already reduced exposure to equities while looking at alternatives. Hedge funds and real estate are obvious targets but it is also interesting that a fifth (20%) of those who have already adjusted their portfolios raised exposure to asset-backed securities. It shows that investors are increasingly recognizing their benefits, namely attractive annual income of 5-6% over three- to five-year terms with the security of having first call on the underlying assets.”
MPG is a multi-disciplined investment house that specialises in the creation, management and administration of regulated mutual funds and issuers of asset-backed securities for SMEs, financial institutions and sophisticated investors. It currently manages funds with a gross value of $500m. For more information on Managing Partners Group see: www.managingpartnersgroup.com