Commonfund, a prominent investment manager for nonprofit institutions, has released the results of its survey of nearly 300 sophisticated institutional investors from endowments, foundations, healthcare organisations, family offices and public pensions in attendance at the recent 23rd Annual Commonfund Forum.
Investors attending the conference represented USD1.1 trillion in total assets. The survey results underscore the themes that drove discussion at the event, including the dual-track economic recovery, ESG and environmentally sustainable investments, and the evolving opportunity set in private capital.
When asked about their expectations for US stock market returns in 2021 versus the 10-year average annual return of 13.6 per cent for the S&P 500 Index, the majority (58 per cent) believe this year’s returns will be lower than average, while just 10 per cent expect that they will be higher. These investors are similarly apprehensive about the US economic recovery, with 76 per cent of respondents ranking the prolonged impact of Covid-19 among their top three concerns for 2021, followed by bubbles/narrowness of stock market valuations (60 per cent) and the expanding US deficit (5 per cent).
“The global economy appears to be on a path to recovery, but investors remain justifiability cautious about the effects of the ongoing pandemic, narrowness of market returns and increasing deficit levels,” says Mark Anson, CEO and CIO of Commonfund. “We believe that one of the keys to successful investing through uncertain times is to seek out pockets of opportunity created by these imbalances, while remaining true to strategic asset allocation targets.”
Looking at their own organisations, two-thirds (67 per cent) of all respondents are “cautiously optimistic” that over the next 10 years they will be able to achieve CPI +5 per cent, a rate of return sufficient to cover inflation, distributions, and investment costs. This represents an increase from the last Commonfund Forum survey in March 2019, which found that only 46 per cent of investors were “cautiously optimistic” about achieving CPI +5 percent. An additional 9 per cent of 2021 respondents are “very bullish” about their prospects, roughly even with the 2019 findings.
“Following the tumult of last year, many institutional investors – and nonprofits in particular – face the prospect of significant changes in their operations and in the fulfilment of their missions,” Anson says. “However, these same investors remain cautiously optimistic which reflects their commitment to long-term strategic policies and investment practices that are aligned with their overall objectives.”