NEW YORK, March 13 Institutional investors expect their portfolios to grow an average 7.6 percent this year by increasing their investments in emerging markets, venture capital, real estate and natural resources, according to an investor outlook survey released on Wednesday.
Those surveyed cited the gridlock in Washington on trimming the U.S. budget deficit as the most significant risk this year. Last year, their primary worry was the euro zone debt crisis.
About 220 representatives of non-profit institutional investors and pension funds, with combined assets of $123 billion, were surveyed during Commonfund's annual Forum.
The Commonfund Investor Outlook Survey showed portfolio managers expect the MSCI Emerging Markets Index to outperform the Standard & Poor's 500 Index over the next three years.
Commonfund manages more than $26 billion for over 1,500 small and mid-sized endowments, foundations, pension funds and other institutional investors.
Only 27 percent of investors expect commodities, as measured by the Dow Jones/UBS Commodities Index, to outperform the S&P 500 Index over the next three years. Twenty-six percent of investors expect hedge funds, as measured by the HFRI Fund Weighted Composite, to outperform.
U.S. government bonds, as well as high-yield bonds, are expected to underperform as expected allocations to U.S. Treasury and core U.S. fixed income strategies dropped to 52 percent and 43 percent respectively from last year.
The two greatest areas of concern for investors are market volatility and shortfalls in meeting return objectives. The factors of least concern are deflation and portfolio liquidity.
"The data shows that overall concerns about downside risk have been reduced since last year, although respondents are still very worried about achieving their investment return goals," Commonfund President and CEO Verne Sedlacek said in a statement.