Staying the course: investment priorities in a world upended

The timing of the survey overlapped with Russia’s invasion of Ukraine, providing useful insight into the respondents’ reaction and potential repositioning as a result of the war. Specifically, the survey time frame spanned early February – early April, with 56 online survey responses received before and 31 responses after the invasion.  As a result, as events unfolded, we followed up with qualitative interviews intended to discern the impact of the war and related market volatility on asset allocation, particularly within alternative investments.

In 2022, central banks continue to balance the trade-off between promoting growth and restraining inflation, with more emphasis on the latter as of late. Meanwhile, Russia’s invasion has upended global energy and food markets and aggravated concerns about surging inflation and rising interest rates. Our survey confirmed that these macro concerns were top of mind for endowment, foundation and healthcare investors, especially after the outbreak of the war.

Investment priorities of respondents before and after February 24^th (Russian invasion of Ukraine)

Two-thirds of survey participants responded before the outbreak of the Russia-Ukraine war on February 24^th. The portion of survey participants who named mitigating inflation as a top investment objective increased from 66% before Russia’s invasion to 77% after the war started.

While endowment, foundation and healthcare investors are mindful of heightened inflation and market volatility, they continue to recognize the need to maintain risk to pursue long-term returns. After managing inflation and rising interest rates, these investors’ next-highest investment priorities were to increase idiosyncratic sources of return (48%) and implement a pro-risk view (44%).

Just over half of our respondents expected to add to their private equity weightings, including a sizeable portion that intended to increase their allocations by double-digit percentages. Almost half of investors anticipated boosting their venture capital exposure. The robust performance of private equity and venture capital in recent years may help explain the enthusiasm for these asset classes.

Views on ESG adoption were bifurcated amongst endowment, foundation and healthcare institutions. Just under half of the investors surveyed have adopted ESG practices and strategies, driven largely by a desire to make a positive impact, while the other half who haven’t adopted ESG are split on their intentions.

From elevated inflation to the outbreak of the war in Ukraine, 2022 has presented endowment, foundation and healthcare investors with difficult market and macroeconomic conditions to navigate. To better understand how investors are approaching the current investment landscape, BlackRock partnered with Coalition Greenwich to conduct a research survey of these investors’ priorities. We found that investors are watching the current macroeconomic climate carefully, with a measured appetite for risk that is underpinned by long investment horizons and well-diversified portfolios.