The top three challenges for institutional investors in 2017 will be Market Volatility, the Low Yield environment and meeting Total Return Objectives, according to research from CAMRADATA, a leading provider of data and analysis for institutional investors.

CAMRADATA latest Investment Considerations survey was conducted amongst asset managers, consultants and pension schemes, who shared their considerations about investments, asset classes, asset allocation and financial markets for this year.

Market Volatility was considered their most pressing issue. 84% of respondents said it will impact their investment decision-making this year, a figure which has increased by 21% since the last survey in June. Consultants also identified this as the number one concern for their clients.

Sean Thompson, Managing Director, CAMRADATA says, “Movements within the financial markets over the past year clearly justify these increased concerns about volatility. Trump’s inauguration as US President, the uncertainty surrounding Brexit and the elections in France and Germany will all have repercussions on the markets.

 “Investors will need to adapt their investment strategies to this new environment and our survey report provides valuable reading, giving an indication of the prevailing attitudes amongst asset managers, consultants and pension schemes.”

The Low Yield environment is another issue consultants and investors agree upon, and one which figures highly in their choices with 73% of investors selecting this as one of their top three issues.

Meeting Total Return Objectives is the third top key issue for investors, although Protecting Capital and Managing Uncertain liabilities are not far behind.

Another growing issue for investors and consultants was Protecting Capital.  When surveyed in April; just over 10% of both consultants and investors saw it as a key issue – however, in November it was seen as a big issue for both consultants (56%) and investors (47%).

Compliance and Regulation; the need for Short-term Liquidity; and rising interest rates all appeared to be less of an issue to investors currently, when making investment decisions.

In terms of asset allocation, the top asset classes that consultants said their pension clients are invested in are Global Equity and Emerging Markets Equity, all of which received a 100% response rate.

However, this latest research also highlighted disparities between some of the asset classes. For instance, Emerging Market Equity was selected by 100% of consultants, whilst only 39% of the pension schemes said they were currently invested in this asset class.

And, with Global Equity, whilst this was one of the most invested asset classes chosen by pension schemes, it was still only chosen by 70% of the schemes; whereas 100% of consultants said there clients were invested in this.

There has been a big drop – from 83% in April to only 27% in December in consultants suggesting their pension clients would be considering liability-driven investment (LDI) strategies over the next six months. However, 30% of pension schemes are still considering LDI as a solution.

Diversified Growth Funds (DGF)/Multi Asset strategies will continue to play a key role this year with around half of consultants expecting their clients to invest in DGFs; as well as pension schemes themselves. Plus half of the asset managers expect to be marketing this class over the next six months.

The survey also found that the top three asset classes, which investors believe will see the most inflows in the next six months, are DGFs/Multi Asset, Infrastructure; and High Yield Bonds.

Interestingly, Environmental, Social and Governance (ESG) continues to be a hot topic in the asset management industry, with just over half of all investors and consultants saying they expected asset managers to have ESG criteria integrated in their investment process.

Sean Thompson, Managing Director, CAMRADATA says, “The uncertainty ahead presents both investment opportunities and challenges. CAMRADATA Live can help institutional investors stay ahead of the game and monitor what’s happening in the global markets, ensuring they have the most up-to-date information in order to make informed investment decisions.”