Context Summits, the leader in the one-on-one conference format for the alternative investment industry and Mercer, a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, today announced the findings from the 2020 Context Allocator Trend Report. The survey, which was initially fielded in January during Context Summits Miami, and then again in May due to the COVID-19 pandemic, evaluated investment behaviors and trends as it relates to adoption and allocation to alternative investment strategies.
This year’s survey revealed that, despite market uncertainty, investor sentiment toward hedge funds shifted from January to May as those “very optimistic” toward hedge funds grew from 7% to 13%. Investors are, however, evolving their approach to evaluating managers, placing a greater emphasis on track record, which increased from 11% in January to 16% in May, and paying less attention to performance, which declined from 21% in January to 16% in May.
“It’s not surprising that allocators are managing through the pandemic and economic crisis by adjusting their investment allocations,” said John Culbertson, President and CIO of Context Capital Partners. “In a post-COVID-19 world, it is likely some trends, including virtual meetings and interactions will accelerate and could become permanent. But as long as long-term relationship building between managers and allocators remains relevant, face to face meetings and an intense due diligence process will remain an important part of go-forward allocations.”
Additional key survey findings include:
- Allocators Are Taking Action with Their Portfolios: 55% of allocators intend to adjust their portfolios, although there is nearly an even split on whether the changes are designed to add or mitigate risk.
- Allocations Happen Quickly: Allocators committed to making a change typically spend 50-100 hours conducting rigorous due diligence with 56% reporting that implementation of new allocations occur within 6 months or less from an initial introduction; 85% of new allocations occur within 12 months.
- ESG Factors Are Gaining Traction: Investor sentiment over the importance of ESG continues to shift slightly more positive as extreme negative sentiment decreased from 42% in 2019 to 34% in 2020 and extreme positive sentiment saw a slight uptick from 9% in 2019 to 12% in 2020. We expect this trend to continue as the investors push for clarity and metrics around the ESG framework.
- Market Downturn Worries Allocators the Most: Fears of a market downturn are most worrisome to investors in the wake of the COVID-19 pandemic, with this increasing from 27% in January to 31% in May. Reaching return goals is the second highest concern.
“As our survey results indicate, asset allocators hold increasingly diverging views on public markets due to the COVID-19 crisis, with many seeing opportunities in certain sectors such as e-commerce and transformational technologies, as well as emerging market and credit investments,” said Gregg Sommer, Partner at Mercer. “These periods of market volatility highlight the importance of adopting and maintaining investment discipline and governance processes.”
The 2020 report, a joint project between Mercer and Context Summits, was conducted at Context Summits Miami 2020, an annual event that convenes fund managers and allocators for a series of one-on-one meetings and small group interactions. The report is based on over 360 responses from institutional allocators who attended this year’s event in January.
Subsequent to the initial survey, an updated survey was emailed to more than 100 institutional allocators in May.
The full survey results, along with an analysis of key findings, are available via the latest Context Allocator Trends Report at: https://contextsummits.com/resources/allocator-trends/
About Context Summits
Context Summits and Context 365 have one goal—to connect the alternative investment industry. Context Summits, the pioneer of the one-on-one conference format, brings managers and allocators together for focused, efficient, and productive one-on-one meetings though single and multi-day events. Originally built to support our conferences, Context 365 is an online platform where managers, allocators, and service providers can make relevant connections within our exclusive network. This proprietary technology is now available on a daily basis so members can gain solid leads, cultivate tangible opportunities, and build meaningful relationships 365 days a year. For more details, please visit: http://www.contextsummits.com.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.