Frankfurt am Main, December 1 2015
Institutional investors increase their equity quotas but barely with active strategies
Interest in real asset investments continues to grow
Artificial intelligence (AI) can also assess investors’ emotions
The survey results thus confirm the sustained, high demand for passive or rule-based strategies, such as overlay management solutions, as seen in practice. This is reflected e.g. in the sharp rise in assets managed by Universal-Investment’s quantitative portfolio management division – which rose from €20bn to €26bn in the ten months up to the end of October 2015 alone.
With interest rates remaining stubbornly low, institutional investors are increasingly looking for alternative investments. 78 percent of the respondents said they intended to significantly raise their alternatives quotas to three to nine percent over the next two years. In doing so, they would focus on real estate, and, to a smaller extent, also on infrastructure investments. Of the 70 percent of the institutional investors planning an increase in their real-estate quotas, 77 percent said they preferred to do so by means of an investment fund vehicle, rather than investing directly in real estate. “In terms of hands-on institutional capital investment, the German Master KVG principle is establishing itself more and more also for investments in real assets. This is also confirmed by our growth figures in the real estate business. Over the past three years, real estate segregated mandates and master funds have invested in around 300 properties at a cost of over €4.5bn for our investors, says Markus Neubauer, managing director of Universal-Investment.
The following assessments show how the influence of artificial intelligence (AI) continues to grow for financial investments: over half the respondents believe that AI is now already competing with classical, active portfolio management. Also, almost all predicted its rising usage in making investment decisions, with 62 percent predicting its use for short-term, and 17 percent for medium-term, investment decisions. “The clear answer to our last question was very surprising. Over two thirds of the institutional investors believe that artificial intelligence is capable of accurately assessing emotional aspects such as greed or fear. The industry’s future thus certainly appears to be closely linked with the strategic use of AI,” says Markus Neubauer.
About the survey: Universal-Investment polled around 90 German institutional investors (i.e. pension funds, utilities, businesses, financial institutions, insurance companies and foundations) at a conference in October. The survey was conducted using TED, directly at the conference. The investment professionals represent some of Germany’s largest investment companies, with significantly more than €400 bn under management.