Natixis: Investors’ long-term return expectations fall to 6.3%

65% believe market volatility will increase from 2023, according to Natixis Investment Managers survey

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Investors dropped their long-term return assumptions to 6.3% in Natixis’ 2024 investment survey, a near 28% decrease from last year’s 8.8%.

The falling forecast, where 65% believe market volatility will increase from last year, comes alongside changes with AI as well as remaining fears of recession. Almost half of respondents still believe recession is inevitable, however those who believe it will be avoided increased by 20% from 2023.

AI impacts seem to be pervading through multiple areas of the industry, with just over half of those surveyed using the technology in their analysis and 73% maintaining it will reveal currently unclear investment opportunities.  

See also: Arc: Average private client portfolio returns 5.6% per year over two decades

Areas of concern for investors were topped by recession, but shadowed by concerns of war and terrorism, recorded by 50% of respondents, while 36% feared a possible central bank policy error.

Darren Pilbeam, Natixis head of UK sales, said: “It is clear that fund selectors expect the 2024 investment landscape to be anything but normal.

“Despite the shifting environment, the challenges ahead are a result of continued macroeconomic and market trends – such as prevailing higher rates, the rapid impact of AI, and the possibility of an EM bounce-back – that are being forecast and planned for accordingly.”

Across emerging markets, China remains out of favour with 64% of investors for 2024, while 48% marked Asia ex-China as their top lookout for 2024. Excluding Asia, both Latin America and Eastern Europe gained 36% of the vote for best opportunity in 2024.

Bonds hold a positive outlook for the year, with 66% responding they were bullish on fixed income, and 62% believing long duration will outperform shot duration for the year.

See also: Will inflation fall enough for ‘year of the bond’?

“Against this backdrop, selectors are preparing product and investment strategies that don’t just fit immediate client needs, but also help support them through a year that could be just as volatile as 2023,” Pilbeam said.

“In equities, selectors are counting on large caps to carry them through what could be a turbulent year, and are lengthening duration on bonds to capitalise on the rate environment.”

Among current private equity investors, making up 79% of respondents, almost half plan to maintain their holdings while 39% plan to add to them. They also report 51% claiming clients want additional private assets.

“Private assets and active management are also increasingly coming to the fore for selectors, as they seek to protect portfolios in a challenging year,” Pilbeam added.

The survey was conducted across 500 investment professionals in 26 countries, with a combined $34.8trn under management.

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