Post-pandemic change is afoot among asset managers

By Gaia Lamperti

The Covid-19 pandemic continues to significantly impact global investment strategies among global asset managers, according to new research from Clearwater Analytics, a global industry-leading SaaS solution for automated investment data aggregation, reconciliation, accounting, compliance, risk, performance, and reporting.

A poll of over 140 asset managers and owners representing more than $5 trillion in AUM showed more than a third of investors’ strategies will change this year in response to COVID. The study asked how investment strategies had changed since the start of the pandemic, and how this compares to what they have planned for 2022 in the wake of the recent omicron surge.

At a macro level, 58% of companies reported making changes to their strategy two years ago, albeit only 13% said the change was material. Looking forward from today, 33% plan further changes to their strategies and 5% said they will be material changes.

“Although these numbers are much lower than 2020, it’s still a meaningful shift. Given the many unknowns and unprecedented market volatility early in the pandemic relative to what investors are dealing with today, changes to investment strategies were inevitable,” commented Suraj Poozhiyil, Senior Vice President at Clearwater Analytics.

The research also showed that 45% increased portfolio liquidity, while only 7% decreased. Most investors held steady on fixed income duration, but a meaningful 27% decreased and 16% actually increased duration. The percentages were similar for credit quality, with 25% increasing and 7% decreasing quality. Conservatism was evident on exposure to Covid hit sectors like retail, with 31% moving away, however, 6% saw a buying opportunity. Equity allocations went up by 28%, almost double the number of decreasing allocations – with investors taking advantage of what became historic buying opportunities.

Poozhiyil added: “Investors’ early reaction to the pandemic was biased toward conservatism, with liquidity increases, fixed income duration decreases, and credit quality increases, but tempered with meaningful increases to equities and private assets.”

A small percentage, 14%, plan to increase portfolio liquidity. An equal number of companies planned to either increase or decrease fixed-income duration at 12% each. However, a similar number of companies plan to improve credit quality, with only 5% planning to decrease it – an approach more consistent with rate increases. Despite the historic run-up in equity markets, 15% of companies plan to increase their allocation in 2022, with only 8% taking money on the table.

“Current plans show companies largely holding the course but continuing the trend of focusing on private assets while finetuning the profile of their fixed income portfolio. Their responses suggest investors have learned to live with Covid as our society tries to do the same,” Poozhiyil concluded.