Increased complexity in risk management is the biggest concern for institutional investors across the globe, a new survey shows.
Commissioned by BNP Paribas Investment Partners and conducted by polling firm YouGov, the survey found the idea that risk management will become more complex is the biggest concern for 23% of respondents.
The survey spoke to 177 asset owners representing $6 trillion in total assets. A further 14% said the biggest concern was hiring and retaining talent; and 11% each said the ability to efficiently manage costs and the ability to efficiently use capital were the biggest concerns.
When questioned on how confident respondents were on managing certain risks, 7% said they were not confident when it came to managing political risk; 15% were relatively confident; and 73% were confident. The remainder said they did not know.
While 63% of respondents said they formally review asset allocation strategies at least twice a year, BNP Paribas said in the report that many asset owners “will even be conducting monthly strategic reviews as they move to more active management of risk.” Figures were not available.
The survey showed a correlation between the frequency of asset allocation reviews and the proportion of assets managed in-house — the higher the proportion of internally managed assets, the more frequent the reviews. “This suggests there is room for third parties and asset managers to help asset owners reduce risk and support more frequent asset allocation reviews,” the survey said.
Respondents were made up of 34% from insurance companies; 33% from pension funds; 14% from official institutions including central banks, supranational agencies and sovereign wealth funds; and the rest from corporations. Geographically, 41% of respondents were from Europe, the Middle East and Africa; 32% from the Asia-Pacific region; 16% from North America; and the rest from South America.
Source: Pensions & Investments – By Sophie Baker