A survey by bfinance of 418 institutional investors from 39 countries has found that almost half had direct exposure to Russia leading into the first quarter of the year.
Only 10 per cent of the surveyed investors said they had fully exited last quarter, while 35 per cent said they were in the process of doing so but had run into challenges due to illiquidity and lock-ups.
“The views of institutional investors in Australia that responded to the bfinance snap poll are very much in line with their global counterparts with nearly half of Australian institutional investors having some direct exposure to Russia,” said bfinance senior director of client consulting, Frithjof van Zyp.
“Of those, 55 per cent are still trying to exit due to illiquidity and lock-ups.”
Super funds including AustralianSuper, Australian Retirement Trust, Aware Super, Rest and Cbus have all pledged to exit Russia as soon as possible.
The Financial Services Council recently released guidance to assist super trustees and fund managers with their divestment of Russian assets.
The survey from bfinance found that less than 30 per cent of Australian investors had adjusted or planned to adjust their ESG approach in light of recent geopolitical events compared to 39 per cent of institutional investors globally.
“Even among those that indicated that the conflict would not affect their ESG approach, many said that it had illustrated the importance of having a robust approach here,” said bfinance head of investment content Kathryn Saklatvala.
“Indeed, we saw cases where ESG-oriented investors had significantly reduced or eliminated Russia exposure ahead of 2022, which benefited performance in Q1.”
Four in five global investors were concerned that inflation and rising rates would impair their ability to achieve investment objectives over the medium term and 41 per cent said that they expect to increase the inflation sensitivity of their portfolios during 2022.
Over the next 12 months, 46 per cent of investors expect to increase their exposure to infrastructure compared to 31 per cent during the past 12 months.
The survey also identified surging private debt and real estate allocations along with increasing allocations for private equity, hedge funds and agriculture/forestry.
“To some extent, the asset allocation changes we are seeing here represent a continuation of some longer-term shifts, such as the shift in favour of illiquid strategies and real assets,” said Ms Saklatvala.
“Yet investors’ concerns about inflation and rising rates—which come through in these statistics—are giving greater impetus to these trends.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
