Australian investors more risk averse than global peers

Oksana Patron

18 November 2022

More than half of Aussie investors (52%) are currently underweight risk assets, compared to 28% of their global peers, as macroeconomic concerns have made institutional investors shift their portfolios in the year of “major market and macroeconomic upheaval”, bfinance biennial global asset owner survey found.

Although Australian investors followed the global pattern towards a preference for private market strategies, only 43% of them expected these strategies to increase compared to 52% of those surveyed worldwide.

Also, 28% of investors expected to cut exposure to equities and there was a very modest positive ‘swing’ in favour of fixed income, driven by higher interest rates and investor de-risking.

The survey also found that 40% of Australian investors were shifting towards passive assets in the next 18 months, compared to 14% of all investors surveyed globally.

Globally, 20% of institutional investors said they would shift their portfolios towards active management. This stood in stark contrast to 2018 when 31% of investors declared they were shifting towards passive investments.

According to the survey, the movement in favour of active management was most evident among insurers and endowments/foundations while wealth managers were trending towards passive as they sought to compete with peers on cost while simultaneously adding alternative strategies.

On the other side, Australian investors showed a stronger preference for incorporating the environmental, social, governance (ESG) factors, with 48% currently targeting net zero compared to the global average of 24%.

“ESG-related practices, including newer themes including carbon reductions and impact investing, are still on the rise. A quarter of investors are now engaged in ‘impact investing’, with a further third planning on doing so. When it comes to carbon, 32% of investors are reducing portfolio carbon emissions/intensity,” the survey found.

“When appointing managers, investors take ESG credibility increasingly seriously, with a growing emphasis on climate and carbon. One third of respondents would now be “unlikely” to hire a manager who has not made a Net Zero commitment. Beyond the climate topic, US respondents and Family Offices are considerably more active on the subject of gender and ethnic diversity than on climate-related aspects.”

bfinance surveyed 396 senior investors, whose institutions were responsible for more than $13 trillion in assets, based in 40 countries.