North American institutions keeping long-term focus amid near-term noise

North American institutional investors are staying focused on long-term strategies despite market and political uncertainties, according to the latest Global Investor Insights Survey from Schroders.

The survey, which polled institutional investors across pension funds, insurance companies, family offices, endowments, and foundations, shows a strong commitment to maintaining investment strategies in the face of global volatility.

Nearly two-thirds (63 percent) of North American institutional investors believe that upcoming elections are short-term distractions and are continuing to follow their long-term plans. This is notably higher than the global average, where only 45 percent share this sentiment. Endowments and foundations are particularly confident, with 77 percent holding firm to their strategies, according to the survey.

“Many institutional investors understand that the immediate impact the election has on the markets is temporary, and that a well-informed, long-term view is crucial,” Adam Farstrup, head of multi-asset for the Americas at Schroders said in a statement. However, he also noted that “nearly two in five institutions are adjusting their risk profile, anticipating long-term policy changes.”

While political events may be seen as short-term distractions, economic concerns are front and center for North American investors. Seventy-five percent of institutional investors highlighted central bank policy as a major factor influencing portfolio performance in the next 12 months. High interest rates (71 percent) and the risk of a recession (62 percent) are also driving investment decisions. Pension funds are particularly wary of inflation risks, while insurance companies and endowments are more focused on geopolitical concerns.

Private markets continue to be a critical area of focus, with 73 percent of North American institutional investors already investing in private assets. Among these, private equity and private debt are top priorities for increased allocation in the coming year.

Fifty-six percent of pension funds view private debt as an appealing option, especially amid rising interest in sectors like infrastructure and renewable energy. More broadly, 56 percent of institutional investors in North America agreed private credit would be the biggest investment opportunity within private fixed income over the next one to two years.

Nick Thompson, head of private asset sales for North America, highlighted the growing demand for private market strategies. “We are seeing ample opportunity across the private markets spectrum, especially in technology and the energy transition,” he said.

The survey also touched on artificial intelligence, which is slowly making inroads into the institutional investment space. A modest majority of North American institutions expressed at least somewhat positive sentiment towards using AI, including their in-house investment research and portfolio construction (59 percent) and the operational processes within their organization (54 percent). However, adoption remains somewhat muted, with just around one-third saying they've already leveraged AI for their investment research and analysis (31 percent) and improving their internal operational efficiency (34 percent).