Nearly All Institutional Investors Are Confident About Navigating Future Volatility, According to Wilshire Survey

Geopolitics and Monetary Policy Expected to Ignite Next Downturn

SANTA MONICA, Calif.--()--Institutional investors are self-assured when it comes to navigating the next bout of market volatility, according to a new survey conducted by Wilshire Associates (Wilshire®). Roughly 95 percent of the 75 institutional investors surveyed reported being at least somewhat confident in their organization’s readiness to successfully navigate market volatility. Among that group, 39 percent feel very confident and 56 percent are somewhat confident. Five percent reported that they do not feel very confident.

When asked to compare preparedness today for a bear market with how well prepared the organizations were in 2007, fewer than one-third of respondents (29 percent) feel “far more prepared.” More than half of institutions (58 percent) feel more prepared than in 2007 and the remainder (13 percent) reported feeling the same level of preparedness as 12 years ago.

“If history teaches us anything, it is that markets do not go up forever in a straight line, so it is reassuring that many institutions have been proactive in their preparation for this inevitability,” said Steve Foresti, Chief Investment Officer of Wilshire Consulting. “However, with roughly six-in-ten institutions feeling anything less than far more prepared for a bear market than in 2007, and the same number feeling only somewhat confident about weathering volatility, there’s opportunity for improvement.”

Predicting What’s Next

Institutions are a mixed bag when it comes to what type of investments will generate best market returns in the next 12 months. Investors will primarily look to equities, with 41 percent of respondents citing US or emerging market equities to bring about the greatest market return over the next year (21 percent and 20 percent, respectively). Fixed income was the next most highly-cited investment opportunity, with 29 percent of respondents choosing international and US fixed income as creating the greatest opportunity. One-fifth believe alternatives will generate best market returns and 10 percent will look to real estate.

Most institutions expect geopolitical events to be the most likely trigger for a sustained downturn. Two out of five investors identify the US-China trade situation as being the potential epicenter of the next market correction or downturn. A quarter of survey respondents expect US monetary policy to be the likely trigger and another 14 percent anticipate the 2020 US election could lead to a sustained downturn.

“While it is nearly impossible to predict what might trigger a sustained market correction, institutions can make sure their portfolios are well diversified to account for various risks and market scenarios,” added Foresti. “Since investor perceptions of preparedness for market turbulence can often differ from actual readiness, running portfolio stress tests can be a valuable technique to pre-experience an institution’s preparedness.”

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About Wilshire Associates

Wilshire Associates, a leading global financial services firm, provides consulting services, analytics solutions and customized investment solutions to plan sponsors, investment managers and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets. The firm was founded in 1972, providing revolutionary technology and acting as an early innovator in the application of investment analytics and research to investment managers in the institutional marketplace. Wilshire also is credited with helping to develop the field of quantitative investment analysis that uses mathematical tools to analyze market risks. All other business units evolved from Wilshire’s strong analytics foundation. Wilshire developed the Wilshire 5000 Total Market Index and became an early innovator in creating integrated asset/liability analysis/simulation models as well as practical models in risk budgeting through beta and active risk analysis. Wilshire has grown to a firm of approximately 270 employees serving the needs of investors around the world. Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing 500 organizations whose assets total approximately US $9 trillion.* With ten offices worldwide, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality products and services. Wilshire® and Wilshire 5000® are registered service marks of Wilshire Associates Incorporated. Wilshire 5000 Total Market Index℠ is a service mark of Wilshire Associates Incorporated.

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*Client assets are as represented by Pensions & Investments (P&I), detailed in P&I’s “Largest Retirement Funds” and P&I’s “Largest Money Managers (U.S. institutional tax-exempt assets)” as of 9/30/17 and 12/31/17, and published 2/5/18 and 5/28/18, respectively. The data in this release are copyrighted and owned by Wilshire Associates Incorporated.


Tess Rodriguez
Prosek Partners


Tess Rodriguez
Prosek Partners