Majority of Institutional Allocators Are High on ESG, But Wary of Crypto Investments
NEW YORK, Sept. 13, 2018 /PRNewswire/ — European institutional allocators continue to invest in alternative investments in heavy numbers, according to the latest Context Allocator Trends Report produced by Context Capital Partners. The latest study showed that 72% of European investors are optimistic about the future of the alternative asset management industry, with more than half (60%) planning to increase their net positions in alternative investments by the end of 2018.
This mirrors survey results from Context Summits Miami 2018 earlier in the year, which showed 83% of U.S.-based allocators were optimistic about the industry and nearly 70% planned to increase their net positions to alternatives in 2018.
Among the most talked about alternative investments for European investors in 2018 are ESG and crypto strategies. The data revealed that 43% of European investors already have ESG as part of their overall investment strategy, and 59% plan to increase their allocation to ESG- or impact-related funds this year. Meanwhile, even though cryptocurrencies garnered a lot of attention for their rapid growth and underlying technology, European investors remained skeptical that they could fit into a part of their investment portfolio, with just 5% of allocators currently invested in crypto funds and less than 3% planning to allocate to crypto funds for the remainder of 2018.
The survey of 88 institutional investors and family offices was conducted at the second annual Context Summits Europe event hosted by Context Summits, the preeminent producer of investment summits for the alternative asset management industry. More than 450 institutional allocators, family offices and fund managers, representing more than $1 trillion in cumulative assets under management, attended Context Summits Europe 2018, which was held in Barcelona, Spain on May 14-16, 2018 at the Hotel W Barcelona.
“Despite continued geopolitical uncertainty in Europe over the past 12 months, European institutional investors and family offices continue to seek diversification through alternative investments,” said Ron Biscardi, CEO of Context Capital Partners. “A lot has happened over the course of the year, but European allocators’ optimism about the alternative asset management industry has not waned. The emergence of new and interesting strategies and asset classes, especially ESG and crypto, means investors can stay prepared for any potential market gyrations.”
John Culbertson, chief investment officer of Context Capital Partners, added: “Between Trump’s presidency and the continued Brexit negotiations, among other things, it’s no surprise that European investors are taking a cautious approach towards the market in 2018. Rising interest rates in Europe and the U.S., continued geopolitical instability, and the continued threat of a prolonged U.S.-China trade war has led to apprehension among European allocators. The appeal of alternative investments, however, remains strong and the demand for differentiated alternative investment strategies continues to grow.”
Other key findings include:
- Allocators Prefer New Over Existing Managers: Almost three quarters of investors (75%) said they prefer to allocate additional capital to new or emerging managers, defined as those with fewer than $300 million in assets or less than a three-year track record. Over half of investors (52%) said they are looking for a fund with a 1-3-year track record.
- Institutional Allocators Are High on ESG, But Wary of Crypto: Nearly half of European investors (43%) consider ESG, or other responsible investing factors, as part of their investment strategies, with 60% planning to increase their allocation to ESG- or impact-related funds in 2018. In contrast, institutional investors are still widely skeptical of cryptocurrencies, with less than 5% of European attendees surveyed investing in cryptocurrencies and only 3% planning to allocate to crypto funds in 2018.
- Quantitative and Algorithmic Strategies Finding Broad Appeal: European investors appear far more open to mathematical strategies compared to their U.S. counterparts. Almost 60% of European attendees have shifted portions of their portfolio over to algorithmic and quantitative strategies and away from those with a more fundamental approach. In comparison, fewer than three in 10 American investors surveyed at Context Summits Miami 2018 said they’ve replaced their hedge fund exposure with such strategies.
- European Investors Are Bullish on Commodities and Emerging Markets for 2018: European investors predicted that commodities and emerging markets will be the strongest performers for the rest of 2018. Commodities led the way with 34% of the vote, while emerging markets polled at 29%.
- Investors Don’t See Financial Regulations as a Heavy Burden: While the majority of investors at Context Summits Europe 2017 (78%) viewed MiFID II as a burden due to the expectation of higher fees and onerous restrictions, 82% of 2018 attendees from across the continent said MiFID II regulations had no impact on their manager fees. In addition, half said that MiFID II and other regulations have not affected where they direct their capital; another 23% said financial regulations had little to no effect on their allocation decisions.
- Investors Not Overly Concerned About Geopolitical Conflicts: A majority of investors (58%) surveyed said Brexit has yet to affect the region’s hedge fund industry in any significant way, while 17% of investors said that Brexit-related fears had discouraged new hedge funds from opening up shop in the UK. Only 14% of investors reported that they were allocating less capital to UK-based hedge funds, and just slightly more than one in 10 attendees said that the fallout from Brexit has shrunk the local talent pool.
For more information and analysis, the full 2018 Allocator Trends Report is available here.
Context Summits hosts several events each year. Upcoming events include Context Summits West 2018, which will be held September 26-28 at the Monarch Beach Resort in Dana Point, California, and Context Summits Miami 2019, which will be held January 30 – February 1 at the Fontainebleau Hotel in Miami Beach, FL. For additional information, please visit http://www.contextsummits.com/.
About Context Summits
As the preeminent producer of events for the alternative asset management industry, Context Summits focuses on elevating the conference experience through an innovative format and structure where relationship building leads to unmatched results. A pioneer of the one-on-one ‘summit’ format, Context Summits utilizes an innovative approach to deliver effective and transparent networking events that elevate the conference experience for managers, allocators and investors. Through its systematic approach, Context Summits is able to attract high quality attendees, making meetings efficient and productive. For more details, please visit: http://www.contextsummits.com.
About Context Capital Partners
Context Capital Partners, LP is a leading alternative investment specialist firm headquartered in Bala Cynwyd, PA. Through direct and indirect partnerships, Context provides seed capital, marketing, distribution, operations and infrastructure support to top-tier alternative asset managers. Context’s focus is delivering superior investment solutions to institutional investors and family offices by launching and expanding low correlation investment products that deliver clear edge. For more information about Context Capital Partners, please visit www.contextcp.com.