Institutional investor survey
Staying the course: investment priorities in a world upended
Endowment, foundation and healthcare investors have much to navigate in the months and years ahead. BlackRock partnered with Coalition Greenwich to survey these investors' priorities in a world upended. Explore excerpts from the survey below and download to read the full report.
The timing of the survey overlapped with Russia’s invasion of Ukraine, providing useful insight into the respondents’ reaction and potential repositioning as a result of the war. Specifically, the survey time frame spanned early February – early April, with 56 online survey responses received before and 31 responses after the invasion. As a result, as events unfolded, we followed up with qualitative interviews intended to discern the impact of the war and related market volatility on asset allocation, particularly within alternative investments.
Key findings from the survey
Mitigating macro risks is investors' top priority.
The primary concerns of endowment, foundation and healthcare systems were inflation, rising interest rates and drawdown risks. Despite these concerns, almost half of our cohort stated it was important to implement a pro-risk view.
Russia’s invasion of Ukraine amplified macro concerns.
The portion of survey participants who said mitigating inflation was a top investment objective rose by 11% after the invasion.
The percentage concerned about rising rates increased by 8%.
The conflict appeared to focus greater attention on the potential for outsized losses and drawdown risks.
Private equity was the most in-demand alternative.
More than half (52%) of risk-on respondents reported plans to implement greater risk by increasing their allocations to private equity, with almost one-fifth of all respondents (19%) looking to boost exposure by a significant 10-20%.
Respondents split on ESG adoption.
Half of the respondents have adopted ESG strategies, while the other half reported that ESG does not currently play a role in their portfolios.
Almost one-quarter of the investors not currently employing ESG indicated that they plan to adopt responsible investing practices within the next five years.
OCIO provides institutions with more resources.
One-quarter of respondents reported that they currently use an OCIO, and institution size was a good indicator with smaller institutions being more likely to outsource.
The main reasons for outsourcing the investment function were a lack of internal resources and a desire for better risk management.
Download the full results
Our survey findings focus on how decision-makers at U.S. endowment, foundation and healthcare systems are approaching a volatile environment pragmatically, looking to mitigate key risks while assuming investment risk opportunistically in pursuit of long-term returns.
In 2022, central banks continue to balance the trade-off between promoting growth and restraining inflation, with more emphasis on the latter as of late. Meanwhile, Russia’s invasion has upended global energy and food markets and aggravated concerns about surging inflation and rising interest rates. Our survey confirmed that these macro concerns were top of mind for endowment, foundation and healthcare investors, especially after the outbreak of the war.
We’re certainly thinking about the implications [of Russia’s invasion of Ukraine] related to inflation and related to China and its future potential behavior.
Investment priorities of respondents before and after February 24th (Russian invasion of Ukraine)
Two-thirds of survey participants responded before the outbreak of the Russia-Ukraine war on February 24th. The portion of survey participants who named mitigating inflation as a top investment objective increased from 66% before Russia’s invasion to 77% after the war started.
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Survey question: On a scale of 1-5, where ‘1’ is ‘not important’ and ‘5’ is ‘very important,’ please rate the following investment sentiment and positioning by level of importance to your fund over the next 12 months.
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Survey question: On a scale of 1-5, where ‘1’ is ‘not important’ and ‘5’ is ‘very important,’ please rate the following investment sentiment and positioning by level of importance to your fund over the next 12 months.
While endowment, foundation and healthcare investors are mindful of heightened inflation and market volatility, they continue to recognize the need to maintain risk to pursue long-term returns. After managing inflation and rising interest rates, these investors’ next-highest investment priorities were to increase idiosyncratic sources of return (48%) and implement a pro-risk view (44%).
Just over half of our respondents expected to add to their private equity weightings, including a sizeable portion that intended to increase their allocations by double-digit percentages. Almost half of investors anticipated boosting their venture capital exposure. The robust performance of private equity and venture capital in recent years may help explain the enthusiasm for these asset classes.
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Survey question: Do you plan to increase, maintain, or decrease your target allocation to the following asset classes in the next 12 months?
Expected shifts in alternatives target allocations
Views on ESG adoption were bifurcated amongst endowment, foundation and healthcare institutions. Just under half of the investors surveyed have adopted ESG practices and strategies, driven largely by a desire to make a positive impact, while the other half who haven’t adopted ESG are split on their intentions.
Current ESG utilization rate
Investor type correlated closely to the use and adoption of ESG processes. More than two-thirds of foundations employed ESG or sustainable approaches, while almost three-quarters of healthcare systems reported that they did not, given other priorities resulting from the pandemic.
Survey question: Do you currently employ ESG integration or sustainable strategies in your portfolio?
49%
of survey respondents have adopted ESG practices and strategies
The motivations of investors who have implemented ESG varied. The most cited reason was a desire to have a positive impact on society and the environment, followed by a wish to satisfy stakeholder demands and corporate standards.
From elevated inflation to the outbreak of the war in Ukraine, 2022 has presented endowment, foundation and healthcare investors with difficult market and macroeconomic conditions to navigate. To better understand how investors are approaching the current investment landscape, BlackRock partnered with Coalition Greenwich to conduct a research survey of these investors’ priorities. We found that investors are watching the current macroeconomic climate carefully, with a measured appetite for risk that is underpinned by long investment horizons and well-diversified portfolios.
Download the results
Our survey findings focus on how decision-makers at U.S. endowment, foundation and healthcare systems are approaching a volatile environment pragmatically, looking to mitigate key risks while assuming investment risk opportunistically in pursuit of long-term return.
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