Institutional investors representing $849 billion in total assets attended this year’s Commonfund Forum. Survey respondents cite ongoing interest rate hikes and geopolitical tensions as top economic concerns, according to Commonfund’s annual market sentiment survey.
70 percent of investors surveyed expect private equity investments to deliver best absolute returns over the next 12 months.
WILTON, CT, March 1, 2023 — Commonfund, a prominent investment manager for institutional investors, today announced the results of its annual survey featuring market sentiments from more than 200 sophisticated institutional investors recently polled at their annual Forum.
The results of the survey reflect top-of-mind themes and concerns for investors in 2023 including the state of the U.S. economy, geopolitical issues, opportunities in asset classes like private markets and blockchain, as well as advancements in diversity, equity and inclusion (DEI) and environmental, social and governance (ESG).
When asked about expectations for U.S. stock market returns in 2023 versus the 10-year average annualized return for the S&P 500 Index of 12.6 percent (as of Dec. 31, 2022), 67 percent of investors believe this year’s returns will be lower than average, about a 10-point decrease from 2022, when 78 percent of investors shared this view. Twenty-two percent of investors expect returns to be about the same, an increase from last year’s 14 percent, while 10 percent expect higher returns and 1 percent expect negative returns. Ongoing interest rate hikes and continued inflation (68%) and geopolitical tensions (55%) were cited as the top two economic concerns for investors this year.
“Amid the significant global macro conditions we’re facing, the institutional investment community remains understandably cautious around future economic performance,” noted Mark Anson, CEO and CIO of Commonfund. “Concerns including curbing global inflation and continued geopolitical conflicts have led investors to expect lower than average stock market returns, though interestingly, they are not as pessimistic as they were in 2022.”
When considering their own organizations, over half surveyed are “cautiously optimistic” (58%) about achieving target returns over the next ten years, with 26 percent indicating that they are “very bullish” about their return prospects and 21 percent of respondents noted they are “feeling nervous,” roughly the same breakdown as the survey’s 2022 results.
Additional Survey Findings Include:
- A majority of investors (70%) expect private equity to deliver the best absolute/total returns over the next 12 months. This was followed by private real assets (46%), private credit (45%, a significant jump from last year’s 19%), venture capital (40%), and public equities (32%), among other asset classes. Notably, confidence in cryptocurrencies sharply declined this year to 2 percent from last year’s 10 percent.
- A quarter (25%) of the investors surveyed stated that they have changed their portfolio allocations in the past year to be specifically aligned with ESG considerations.
- Similarly, a quarter (25%) of investors noted that their organizations initiated or increased DEI mandates for their investment allocations.
"Given our clients’ long-term investment focus, it’s not surprising to see optimism for the private markets, with private equity being the most popular response in our survey,” continued Anson. “While we have seen rapid growth in alternative assets interest over the past few years, investors continue to be weary of the volatile environment with optimism in asset classes, like crypto, declining year-over-year.”
Convening 300 investors from institutions across the United States, Canada, Asia and the Caribbean, this year’s Forum centered on the theme of “Still We Rise,” a nod to Maya Angelou’s poem of similar name (Still I Rise). The event’s programming focused on the outlook for the future, bringing meaningful insight to moving an investor’s institution forward in an era of continued uncertainty. The three-day event featured keynotes, panel discussions and breakout sessions, including speakers such as William Dudley, former President and CEO of the Federal Reserve Bank of New York (2009-2018); Rachel Wilson, Director of Cybersecurity at Morgan Stanley Wealth Management; Zanny Minton Beddoes, Editor-in-Chief of The Economist; Haben Girma, Human Rights Lawyer; Richard Haass, President, Council on Foreign Relations; Arianna Simpson, General Partner at Andreessen Horowitz; Dr. David Hall, President of the University of the Virgin Islands; Sue Herera, Anchor-at-Large and Special Contributor at CNBC; Brahima Sangafowa Coulibaly, VP Global Economy and Development at The Brookings Institution, among many others.
Survey Methodology: Commonfund’s Annual Market Sentiment Survey collected answers from 205 respondents representing endowments, foundations, pension funds, operating charities, healthcare organizations, family offices and RIAs. The investors were surveyed in-person at the 25th annual Commonfund Forum, which was held in Boca Raton, Florida from February 13-15, 2023.
Commonfund is a leading asset management firm that empowers educational institutions, foundations, pension funds, family offices, RIAs, and other sophisticated investors to achieve their most important goals. Through our Outsourced CIO business, we provide nonprofits access to world-class investment management solutions. Our CF Private Equity business provides access to private equity investments for both nonprofit and for-profit organizations seeking to diversify their portfolios with private investments. Our Commonfund Institute is among the nation’s most trusted sources for relevant, useful, and proprietary data, analytics, and best practices in financial management. All our businesses are united by a relentless commitment to investment performance matched by an equally relentless commitment to the values of trust, transparency, and ethical behavior that have inspired us since our founding more than fifty years ago. www.commonfund.org