Drapella Capital Management Report Shows Rise in Confidence Among the World's Major Institutional Investors

Ninety two percent of pension fund managers and other institutional investors believe they can realize target returns in five years, considerably higher than the fifty eight percent reported in 2014, according to the 2015 Drapella Capital Management Institutional Investor Report, which includes over 800 respondents in 23 countries.

"A recent surge in market volatility comes following years of strong equity returns and below average volatility," said Carl Innes, chief investment officer at Drapella Capital Management. "Our global Report suggests that while institutional investors have got divergent views on volatility, most want to keep their winning streak going by continuing to expand their portfolios and enhance funded status."

Important Regional Variations

The Report identifies regional variations across subjects such as: expectations for market volatility, views on alternatives, investment goals and objectives and investment possibilities.

Marketplace Volatility Expectations

Away from the U.S. and Canada, volatility expectations over the long term are relatively low with a reduction in the frequency of boom/bust cycles expected in Asia (ninety three percent) and Europe (seventy seven percent). Only eleven percent of U.S. institutions expect anticipate volatility to decrease, while thirty two percent anticipate an increase in volatility. This trend continues across North America with only twelve percent of Canadian plans predicting a reduction in volatility, while 60 percent envision an increase.

Although market volatility continues to be a worry in Europe and Asia, U.S. institutions are displaying less concern about capital markets than previous years. Europe also remains concerned about a depressed return environment, while Asia is concentrating on regulatory and accountancy improvements and Canada is focusing attention on risk management stratagem. The top concern for U.S. plans is current funded status (twenty six percent), with a large percentage of pensions expected to improve it.

Positions on Alternatives

Although the utilization of alternative investments is still rising aggressively in the rest of the world, the use of liquid and illiquid alternatives seems to be decreasing slightly among U.S. institutions.

Amongst respondents considering an allocation increase to illiquid alternatives during the next one to two years, Asia takes lead with eighty percent, followed by Europe (fifty nine percent) and the U.S. (twenty seven percent).

When questioned on which investment strategies are more likely to under perform during the long term, thirty two percent of U.S. respondents report hedge funds as least likely to fulfill expectations. Risk factor investing is forecast to be the largest disappointment amongst Canadian, European and Asian plans.

When questioned specifically about the charges associated with alternative investments, just twenty six percent of U.S. plans reported said that hedge funds and private equity are worth the fees, in comparison with ninety two percent in Asia and seventy six percent in Europe.

Investment Objectives

In general, primary investment objectives amongst global institutions tend to lean more favorably toward growth, however results differ significantly by geography. Asian institutions are aggressively focused on growth, with sixty one percent listing capital growth as the main investment objective. For plans in the U.S., funded status growth is the main investment objective, however levels vary amongst public plans (sixty six percent) and corporates (thirty nine percent). Plans in Europe are mostly geared towards preservation, whereas Canadian institutions are similarly focused on preserving and developing their funded status.

Investment Opportunities

A global view of the Report’s findings shows plans are mostly looking for investment opportunities during the medium term primarily in emerging Asia. Conversely, a geographical breakdown displays a regional tilt. Seventy two percent of plans in Asia cite emerging Asia as the leading medium-term growth prospect. U.S. and Canadian plans prefer North America (thirty one percent) and emerging Asia (thirty percent). European plans prefer North America (thirty five percent), emerging Asia (twenty three percent) and developed Europe (twenty one percent).

Drapella Capital Management is a Hong Kong based investment and portfolio management firm that assists clients in achieving their financial goals through strategic trading, cumulative research and personalized tailored investment solutions.

About Drapella Capital Management Ltd

Drapella Capital Management is a Hong Kong based investment and portfolio management firm that assists clients in achieving their financial goals through strategic trading, cumulative research and personalized tailored investment solutions.

Drapella Capital Management Ltd
1104 Crawford House, 70 Queen 's Road
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