Retirement Plans Will Continue to Use Global Equity for Returns

Actively managed global equity strategies will continue to be important to institutional investors to generate returns for their portfolios, according to a research report from OFI Global Asset Management, an OppenheimerFunds company, and Greenwich Associates.

The joint research study is based on interviews with 157 senior investment professionals from a mix of corporate pensions, public pensions, endowments, foundations and defined contribution plans with at least $250 million of assets from the United States, United Kingdom, Denmark, Finland, Norway and Sweden. Investors in the U.S. plan to keep their allocations to global equities constant at 20%.

Fifty-five percent of U.S. investors have their global equity allocation in active, alpha-seeking strategies. The planned allocation to these strategies in three years is 61%.

The study shows a growing willingness among investors to move beyond benchmark constraints to provide active managers the freedom to exercise their stock-picking expertise and better reach the level of returns these investors need from their risk allocations. These investors are also increasingly willing to sacrifice diversification to focus on a select number of companies that managers believe have the greatest potential to deliver returns (29% in the U.S.).

“Despite a growing emphasis on de-risking among large institutional asset owners, the need to generate returns and meet future funding targets remains paramount across all three of the regions we surveyed,” says John McDonough, head of distribution and marketing at OppenheimerFunds.

Confidence in active managers is high across all regions, with a total of 80% of investment professionals either planning to make no change (64%) or increase (16%) the degree to which they use active managers three years from now.

More information from the report, “The Future of Global Equity,” is available here.