Persistent market volatility, high inflation and a return to rising interest rates will see pension funds reduce risk in their portfolios, according to research by Aeon Investments.
In a recent survey, the London-based credit-focused investment company found that opinion varied on how severe the market de-risk may be, with the majority (58 per cent) expecting the increase to be ‘slight’.
Some 23 per cent predicted the rise to be ‘dramatic’ while the remaining 13 and 6 per cent predicted no change or decline, respectively.
Elsewhere the survey found that 28 per cent said interest rate risk poses the biggest threat, with 18 per cent predicting credit risk instead.
Just 6 per cent attributed liquidity risk as the greatest cause for concern, while 23 per cent believe it will increase dramatically, and 46 per cent think it will experience a slight increase.
Despite inflation risk still presiding over other factors, with 48 per cent of respondents naming it as the biggest threat, 41 per cent believe the effects will be ‘dramatic’, and 38 per cent think it will be ‘slight’.
81 per cent expect a rise in bond yields, however, they also expect a fall in equity returns, which has provoked many professional investors to de-risk their portfolios.
Nearly all components of the current investment climate are causing conservatism in prospective investors, Aeon Investments also found.
