International investment managers from across the spectrum have cast a dark shadow on the prospective effects for inflation and commercial real estate, but they are optimistic toward gains in currency and the U.S. and Asian equity markets, however.
While nearly 46% of the 102 asset management firm respondents state that commercial real estate risk “is higher this year than last,” roughly 24% expect to increase their allocations to the class. The money managers, which fall into the global mutual fund, hedge fund and private equity industries, also stated that U.S. and Asian equity will jumpstart over the next 12 months, this according to a study released yesterday by RBC Capital Markets.
Additionally, other findings indicate that approximately 45% of respondents that participated in the April 28-May 25 survey prophesize that inflation will “pose a greater threat to portfolio performance than deflation,” the release said.
“Asset managers are concerned about a demanding macro-economic environment that could feature not only inflation but also slower-than-historic growth during the next couple of years,” Marc Harris, co-head of global research for the corporate and investment banking arm of the Royal Bank of Canada (RBC), said in the statement. “Such an environment would place a premium on the basics of identifying sound investments amid uncertainty, managing higher levels of risk and adhering to a disciplined, long-term strategy.”
Further responses portrayed the currency asset class as the new kid on the block as far as future performance goes. Roughly 38% expect to increase commitments to currencies, with 37% choosing equities and 35% tapping commodities. Alternately, just 17% plan to up investments in U.S. Treasuries, and 21% anticipate increasing non-U.S. sovereign debt.
“Despite this [increase and future potential risk], currencies are amongst the top beneficiaries in terms of volumes of allocation by asset managers due to their extremely high liquidity and hedging potential,” RBC Capital Markets Global Head of FX Strategy Adam Cole said in the announcement.
Currently, RBC Capital Markets “is active globally in debt and equity origination, sales and trading, foreign exchange, infrastructure finance and structured products” for its institutions, corporations, governments and high-net-worth clients.