Geopolitical risk top concern for Australian instos in 2024

Geopolitical risk and interest rate hikes have emerged as top concerns for Australian institutional investors in 2024, according to Natixis Investment Managers.

Further down on the list were a decline in consumer spending (46%) and China, including the effect of its economy (41%) and relations with the country (32%).

Natixis IM, which surveyed 500 institutional investors across 27 countries, including Australia, has also found that despite Australians nominating the bond market as one of only two asset classes they were bullish on for 2024, they only had 21% of their portfolios in fixed income, compared to 38% for their global counterparts.

Also, just under half of Australian respondents believed a recession would be inevitable in 2024 but the number of global instos who thought a recession could be avoided had grown from last year results (15%) to 37%.

However, there are promising signs when it comes to inflation, with 55% of Australian institutional investors expecting it to decline in Australia, compared with just 40% globally, the survey said.

At the same time, private assets continued to be a top alternative allocation choice for institutional investors, with two-thirds (66%) saying there was still a significant delta between private and public assets, but after a long run of private investments, 59% of institutional investors said that the popularity of private assets was making it hard to find deals.

Institutional investors have also said in the survey that regulation was one of the factors influencing views on private assets.

More than half of those surveyed (53%) globally said over-regulation of private markets made them less attractive, but, based on their plans for 2024, it appeared this was about easing up future allocations rather than dialling back on what they already owned.

Top 5 biggest economic threats for Australian institutional investors in 2024 compared to global counterparts:

• Growing influence of geopolitical bad actors (50% in AU compared to 49% globally)
• Central Bank Policy (50% AU compared to 42% globally)
• Declining Consumer Spending (46% AU compared to 48% globally)
• Chinese Economy (41% AU compared to 30% globally
• China Relations (32% AU compared to 28% globally