The 11th European Institutional Asset Management Survey (EIAMS), researched by Invesco, found that investors have increased their allocations to fixed income while reducing their equity exposure.  The 2011 survey received responses from 148 investors in 25 countries (mainly Benelux, UK, Ireland, France and the Nordics), with total assets under management of EUR 1,194 billion, or an average of EUR 8.1 billion.

For investor relations officers at public companies we believe the most interesting points are:

1 – European institutions invest most of their equity portfolios internationally while the bulk of their fixed income assets remain in their domestic markets.

2.- The flight to safety has continued with fixed income gaining more ground with investors, but last year’s freefall in equities appears to have been halted with just a small decline, and the sharp reduction in cash suggests that investors are less risk averse.

3. – Fixed income accounts for 58% of institutional portfolios’ assets, compared with 51% in the prior year.

4. – Fixed income looks to gain further ground with corporate bonds the big likely winner at the expense of government debt.  Indeed, 22% of investors are aiming to increase their fixed income component with 30% of investors increasing their exposure to corporate bonds and 31% reducing their government bond holdings.

5. – Allocations to equities have fallen slightly to 27%, down from 2009’s level of 29%, and well below the 32% average allocation reported in 2007.  UK & Ireland remain true to their traditionally high equities weightings, with shares creeping back up to 45% of portfolios this time after slipping to 44% in 2009, though they are still below the 55% weighting seen in 2007.

6. – A small net increase in equity investment is forecast and this is most likely to occur outside of domestic markets. 19% of respondents planned to boost their equity allocations against 15% who signaled an intention to sell.  More marked, though, is the likely swing away from domestic shares towards those in other European countries, the USA, Asia and other markets.  Only 11% of respondents planned to increase equities from their home market, while 21% intended to up the proportion of other European equities as well as those from Asia, while 20% planned to lift USA equity allocations and 23% aimed to boost their “other markets” stock holdings. Institutions are clearly turning away from home markets in equity and fixed income investment. Average domestic equity allocation has fallen to 18% of the total equity slice from 23.5%.

Click on the charts below for a full display.

The management of most pension fund assets in the UK is often delegated to diversified investment management houses and very few self-managed pension funds still exist.

The key players are:

Source: Hymans Robertson

It’s interesting to note that significant segments of these assets are managed passively (according to Hymans Robertson at least 40%).

The remaining self-managed funds worth targeting for investor relations outreach activity include; Aerion, BAE Systems, BP Investment, British Airways Pension, British Steel Pension and Universities Superannuation Scheme.

Aggregate dividents per share for S & P 500 companies

S&P 500 dividends per share, which hit a recent low in 2010, are forecast to grow at an annual rate of 9.8% over the next three years, driven by strong earnings and large cash reserves.

S & P 500 dividend actions - 12 months ended February

Year-over-year dividend increases are up 57.1%, while decreases and omissions are down 81.7% and 74.8%, respectively.

Switzerland is global market leader in crossborder private banking

Assets managed in Switzerland

CHF 5,600 billion managed in Switzerland

In total, banks in Switzerland managed assets of around CHF 5,600 billion at end-2009, up 3.7% or CHF 200 billion from the previous year. Assets managed include the following items: securities, fiduciary deposits, savings and investment liabilities to clients and term deposits.

At end-2009, securities holdings at market value came to CHF 4,508 billion; of these, roughly 62% came from institutional investors, 29% from private clients and just under 10% from companies. Custody accounts for foreign clients comprised 55%, for domestic clients 45%. Between September 2009 and October 2010, securities holdings of foreign private investors fell by around CHF 68.9 billion or 9.6%. This was mainly due to currency effects, i.e. the appreciation of the Swiss franc, rather than outflows of client money.

Source: Wealth Management in Switzerland – SBA – February 2011

Significant increase in global assets

Global assets at the end of 2009 were USD 111,500 billion (BCG 2010a), roughly the same as the previous high seen in 2007 (see figure 1-1). This represents growth of USD 11,500 billion or 11.5% over the year, mainly driven by the recovery in financial markets. It is estimated that in 2014 global assets will reach USD 147.5 billion.

Source: Wealth Management in Switzerland – SBA – February 2011

Sovereign wealth funds are developing more in-house portfolio management teams after the global crisis according to Cerulli Associates. We confirm that this is a trend we have been seeing for some time. While most of the $3 trillion estimated to be managed by SWFs assets continues to be outsourced or passively managed in index replication funds and ETFs, many of the biggest funds have set up in-house Alpha teams with very aggressive return objectives such as doubling their money in three years. This resembles a bar-bell investment approach on a large scale, marrying very cautious outsourcing and passive investing with in-house risk taking in the form of highly concentrated portfolios. The performance of many SWFs was hit particularly hard by the crisis so it is not surprising to see a change in investment approach.