After a thorough search, we are pleased to announce that Alison Telfer will succeed Simon as Chief Executive Officer. Alison is a highly credentialled and experienced leader in the Australian funds management industry having most recently held the role of Chief Executive Officer and Country Head of UBS Asset Management, Australasia since January 2022. She joined from Blackrock where she spent over eight years in senior leadership roles including Chief Operating Officer and Managing Director of Australasia.  She is also currently serving as Chair of the Funds Management Committee Board of the Financial Services Council, and a director on the Financial Services Council board.

Alison will commence her role of Chief Executive Officer at Schroders Australia in February 2026. Simon will remain in his current role until this time before stepping down after an appropriate transition period. Alison will report directly to Meagen Burnett in London, Schroders Plc Group Chief Financial Officer (as Simon currently does).  Alison’s appointment is reflective of Schroders’ commitment to the Australian market and our optimism about the opportunities for growth from both our Australian manufacturing capabilities and our global platform.

Commenting on Alison’s appointment, Meagen Burnett, Schroders Plc Group Chief Financial Officer, said: “Alison was the standout candidate to lead the Australian business and build on Simon’s success. Her experience, strategic mindset, energy, and knowledge of the Australian financial landscape will be critical as we look to build on the positive momentum in the Australian business and its valued contribution to the growth of Schroders Plc.”

Simon Doyle joined Schroders Australia in 2003. He led Schroders’ Australian Fixed Income and Multi-Asset capabilities for over 15 years, including the establishment and management of the well-regarded Schroder Real Return Fund and is recognised as a pioneer of objective-based, multi-asset investment approaches in Australia. Since moving into the CEO role in 2023, Simon has led the business through a period of internal and industry change and led efforts to sharpen our product focus to achieve scale and meet future demand. The Australian business is in good shape with positive flows, rising AUM and solid true-to-label investment performance across key capabilities.

Commenting on Simon’s decision to retire from the business, Meagen Burnett said: “Simon has made a truly exceptional contribution to Schroders over his 22 years with the business. His pioneering approach to multi-asset investing and commitment to innovation set a new standard in our market. More recently, under his leadership as CEO, our Australian business has successfully navigated ongoing industry change and transformation within the wider Schroders business globally, ensuring we continue to deliver for our local clients and position Schroders for future growth.”

Simon Doyle, CEO, Schroders Australia, said: “It has been a privilege to lead Schroders Australia as CEO, and previously as Head of the Multi-Asset and Fixed Income investment teams. The business is in good shape. We are seeing positive flows in all major strategies, and our investment teams are performing well. Alison is an experienced investment leader, the right person to take Schroders forward in Australia, and now is the right time to make this transition. I look forward to watching the business thrive under her leadership”.

Commenting on her appointment Alison Telfer said: “I have admired Schroders’ strength in investing and commitment to the Australian investment community over many years. I am thrilled to take the baton from Simon to lead this wonderful business and continue to build upon the exceptional capabilities of the local and global platform.”

Schroders has operated in Australia for more than 60 years, marking this significant milestone last year. The business remains resilient and is well-positioned for its next phase of leadership and growth, with an unwavering commitment to earning client trust by delivering innovative, client-centric investment solutions and delivering prosperity together.

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Simon Doyle

Investors are increasingly turning to active management to strengthen portfolio resilience and capture specific investment opportunities amid mounting economic uncertainty and market volatility, according to Schroders’ flagship 2025 Global Investor Insights Survey (GIIS). 

The survey, which spans nearly 1000 institutional investors and wealth managers globally, including 79 Australian respondents, encompassing US $67 trillion in assets, revealed that 80% of global investors are somewhat or significantly more likely to increase their use of actively managed investment strategies in the year ahead. For Australian investors, that number is slightly higher at 84% more likely, with 77% confident that active management can deliver value in the new investment landscape.

Investors stated that the top factors contributing to this confidence include the opportunity to capture outperformance (62%), seeking specialist approaches and exposures (62%), and harnessing nimbleness to navigate uncertainty (48%).

The research follows significant market volatility earlier this year, largely triggered by the US Government’s decision to introduce wide-ranging trade tariffs.

Nearly two-thirds of respondents (65%) said that these tariffs are their biggest macroeconomic concern – five times more than the next highest perceived risk. Similarly, continued uncertainty in US foreign policy, for more than half of respondents (56%) was highlighted as the greatest geopolitical risk impacting investment decision-making. This trade and policy uncertainty is likely to have fuelled investors’ strong focus on ‘portfolio resilience’ over the next 18 months – which was the overwhelming top priority for portfolios, having been selected by more than half of all surveyed (58%).

Of the investors who prioritised portfolio resilience, 84% said they are increasingly looking to harness active management. This was driven by a recognition that capturing investment opportunities (53%) and rigorous research into companies and industries (46%) were the top attributes investors sought from their active fund managers.

Simon Doyle, Chief Executive Officer and Chief Investment Officer at Schroders Australia, said: “In the face of heightened economic uncertainty and ongoing market volatility, an overwhelming majority of Australian investors are turning to active management, with 84% set to increase their allocation to actively managed strategies this year, similar to global investor data. With a clear focus on outperformance, specialist strategies, and navigating uncertainty, investors are prioritising adaptability, whilst raising questions about the value of passive approaches in periods of greater unpredictability and future market trends.

“Against the backdrop of trade and geopolitical uncertainty, investment priorities have shifted, with resilience now front of mind. Since broad market gains can no longer be taken for granted, active strategies are playing a crucial role in helping investors manage complexity, build resilience within portfolios, and identify compelling opportunities.”

The hunt for return opportunities is crucial during market volatility

Investors are actively seeking selective opportunities to generate returns through exposure to both public and private markets.

Public equities (46%) and private equity (53%) have emerged as the preferred asset classes for return generation in the current environment.

For those currently investing in private equity, enhanced long-term return potential (67%) – with half of Australian investors believing APAC (including India) will deliver the strongest returns – and access to small and growing businesses (49%) being the top two roles it plays in their portfolios.

Small-to-mid cap buyouts are seen as compelling by 71% of investors, reflecting a pivot towards investments more likely to be insulated from global trade tensions.

Notably, more than two-thirds of investors (69%) who believe public equities will deliver strong returns, believe global equity allocations will deliver the strongest performance. This shift underscores a growing conviction in reducing concentration risk and diversifying away from US mega caps, as 80% identified the S&P 500 as the index giving investors the greatest cause for concern about market concentration. 

The new income toolkit

The survey showed how income generation is evolving from a traditional fixed income allocation to multi-channel, risk-adjusted sources encompassing traditional bonds, corporate debt and asset classes within private debt and credit alternatives (PDCA).

PDCA was the most attractive allocation option for global investors looking to generate income over the next 12 months, selected by half (51%) of investors, followed by high yielding equities (37%) and increasing exposure to real estate (30%).

However, bonds continue to play a crucial role in investors’ portfolios, particularly in today’s evolving market environment. Investors like their ability to provide diversification (70%), their function as a defensive asset to help manage risk (58%), and their contribution to portfolio liquidity (46%). This demonstrates that despite, changing conditions, bonds remain central to building resilient and well-balanced investment strategies.

Simon Doyle added: “In today’s environment of ongoing market volatility, Australian investors are demonstrating a clear shift towards diversification and selectivity in their pursuit of returns, increasingly turning to active management. We are seeing strong interest in both public and private markets, with conviction in global equities and private equity opportunities amongst Australian investors. Bonds continue to play a vital role in building resilient portfolios through diversification, downside protection, and liquidity. This dynamic, actively-managed approach highlights the importance of adaptability in achieving robust long-term investment outcomes.”

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Simon Doyle

Schroders Australia has launched a new active ETF, the Schroder Global Core Fund – Active ETF (ASX: CORE), bringing its total active ETFs to five across a diverse range of asset classes, including global equities, fixed income, multi-asset, and Australian high yield credit.

CORE is an actively managed, quantitative global equity strategy with over 25 years of performance history, and outperformance in 20 of those years. The underlying strategy has assets under management of more than AUD$30 billion across institutional and retail investors. It offers an important middle ground between passive investing and more concentrated fundamental approaches, aiming to outperform while limiting index relative risk, and is competitively priced at 0.25% p.a. management fee and no performance fee.

The strategy employs a mix of quantitative analysis and fundamental insights to identify compelling investment opportunities focused on value and quality from a broad universe of over 15,000 companies, resulting in a portfolio of typically 400+ global companies. This diversified approach mitigates risk by spreading exposure across various sectors and regions and has allowed the strategy to outperform its benchmark in 20 out of the last 25 calendar years.

CORE complements Schroders Australia’s existing suite of four Active ETFs; the Schroder Absolute Return Income Active ETF (CBOE: PAYS), the Schroder Real Return Active ETF (ASX: GROW), the Schroder Global Equity Alpha Active ETF (ASX: ALPH), and the Schroder Australian High Yielding Credit Fund Active ETF (CBOE: HIGH).

As an early pioneer in Australia’s active ETF market, launching ASX: GROW in 2016, Schroders has continued to demonstrate its commitment to innovation in investment solutions.

“The investment landscape is ever changing, and Active ETFs have been a part of that. They play a vital role in democratising active management with easy access to valuable active investment capabilities.  We are delighted to launch an Active ETF for Schroder Global Core Fund today and offer investors access to our successful long-standing global enhanced index strategy and team.” states Simon Doyle, CEO of Schroders Australia.

Lukas Kamblevicius, Co-Head of Schroders QEP Investment team, says the underlying strategy has a strong 25-year track record through multiple economic cycles.

“Since the inception of the Schroder QEP Global Core strategy, markets have presented a variety of opportunities and challenges. Throughout this, our primary goal has been to embed stability for portfolios through strict risk management.

“The strategy has demonstrated strong long-term performance, consistently outperforming its benchmark, the MSCI World Index. We have generated returns consistently in 20 out of 25 years, delivering close to 1% outperformance (composite, gross of fees) on an annualised basis since inception in January 2000.

“With a strong probability of higher volatility in equity markets in 2025 we are well placed through our combined quantitative and fundamentals approach to generate modest, yet consistent, outperformance through the business cycle.”

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Simon Doyle

Schroders Australia has launched two new Active ETFs – the Schroder Global Equity Alpha Fund – Active ETF (ASX: ALPH) and the Schroder Australian High Yielding Credit Fund – Active ETF (CBOE: HIGH).

Schroders has expanded its Active ETF suite to four offerings across a diverse set of asset classes, including fixed income, multi-asset, global equities and Australian credit. These funds complement the existing Active ETF’s, the Schroder Absolute Return Income Active ETF (CBOE: PAYS) and the Schroder Real Return Active ETF (ASX: GROW), as they look to expand their listed range further over the year.

As an early pioneer in Australia’s active ETF market, Schroders launched GROW on the ASX in 2016, demonstrating its commitment to innovation in investment solutions.

Schroders Australia CEO and CIO, Simon Doyle, says: “For over 60 years in Australia, and over 220 globally, Schroders’ compounded investment knowledge and expertise has helped us to deliver consistent, long-term returns for our local clients. These recent Active ETF launches demonstrate how we continue to position ourselves to meet the needs of investors, providing access to products with successful long-term track records that have not been readily accessible to the wider investor community until now.

“In this era of regime shift and increasingly unpredictable times, we have carefully curated  a suite of products that can benefit investor portfolios. We are excited to bring more Active ETFs to market this year”, Mr Doyle adds.

ASX:ALPH is an unconstrained, diversified global equities fund targeting consistent outperformance with index levels of risk. Its portfolio includes long-term structural opportunities and short-term tactical ideas from a global selection of over 4,000 global stocks. The Fund provides exposure to various countries, industries and styles that adapt through the economic and investment life-cycle.

Natalie Morcos, Head of Product, Solutions and Client Delivery, Schroders Australia, says the underlying strategy has a strong 18-year track record through multiple market cycles.

“Historically global markets have outperformed domestic equities over the longer term, certainly for the last decade. For example, the S&P 500 and the MSCI World have outperformed the S&P/ASX 200 by 8% and 3% per annum respectively over that period.

“The portfolio is made up of our best ideas to drive consistent outperformance, regardless of market conditions. ALPH aims to provide capital growth in excess of the MSCI All Country World Index over a three-to-five-year period.

“While pursuing a style agnostic approach, ALPH tilts to underweight value and overweight quality and growth, targeting companies that have strong growth prospects yet to be recognised by the market.

“ALPH offers attractive pricing with a management fee of 0.65 per cent and no performance fees,” she says.

The second new Active ETF, CBOE:HIGH, invests in domestic corporate and financial credit across sectors, issuers, maturity, ratings grade and capital structure dimensions, including subordinated debt. It combines an attractive yield with the capital protection of institutional grade fixed income.

Ms Morcos says the result is a diversified portfolio of credit securities with the potential to deliver consistent returns above cash and term deposits, while maintaining lower risk and volatility than equities.

“HIGH is an actively-managed credit strategy that seeks to deliver returns of 2.5-to-3.0 per cent a year above the cash rate, before fees, all the way through the cycle.

“HIGH provides access to the traditionally defensive higher-yielding wholesale credit universe and it is suitable for those who are looking for enhanced income solutions beyond conventional equity and cash investments, while avoiding the liquidity constraints of private markets,” she says.

Mr Doyle adds that “The benefits of Active ETFs are better understood by the market today, including accessibility with no minimum investment amount, liquidity and full transparency. Through Schroders Active ETF offerings, investors can access decades of proven active management experience across domestic and global markets.”

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Simon Doyle

Australian investors are looking through the short-term market noise created by this year’s US election cycle to harness the major trends of deglobalisation, disruption and decarbonisation by increasing their exposure to global equities and private equity, according to this year’s flagship Schroders Global Investor Insights Survey.

The annual landmark survey of almost 3,000 investors globally – including 159 Australian respondents – representing some $74.5 trillion in assets across the full spectrum of asset classes – found that high interest rates (70%), economic downturn and inflation risk (both 68.8%), and the impact of central bank policy (61.3%)  usurped any concerns about this year’s election cycle for Australian financial advisers and investors.

Instead, investors are committed to their long term investment strategy (45%) and believe active managers should help them outperform passive in the current environment (61.3%). Similarly, 72.5% of advisers agree active managers are better for specialist approaches required in these macroeconomic conditions.

Simon Doyle, CEO and CIO, Schroders Australia said: “As an active manager, it is important to understand not only what drives financial markets, but also investor behaviour during periods of change and market uncertainty. The latest survey results demonstrate that investors are thinking strategically and anchoring to fundamentals, not noise, in evaluating their investment options.

“The survey also recognises that active management has an important role to play in delivering long term objectives and in navigating the shifting fundamentals that are characteristic of the current environment. Diversification also remains an important theme with the contributions of both private and public markets across the investment spectrum highlighted.”

Indeed, the study found that macroeconomic risks, such as higher than expected inflation or a slowdown in growth (65%), central bank policies (55%) and a liquidity crisis  (51.3%) were seen as the biggest threats to fixed income investing.

In this environment, private credit (48.8%) and investment grade corporate debt (42.5%) were highlighted as the biggest investment opportunities within the fixed income space in the next one-to-two years for Australian financial advisers.

On the other hand, almost half of those surveyed expect to maintain their global equity allocation (48.8%) over the coming two years, with 38.8% of respondents increasing their investment over the same time period.

Alex Tedder, Co-Head of Equities, Schroders, said: “It’s interesting to note that respondents are overall quite positive on the prospects for active managers. Equity markets this year have been dominated by a small number of companies. This has been a global trend, but has been particularly pronounced in the US, with the technology and AI phenomenon very powerful in that market. Since July, we’ve had a reassessment amid changing interest rate expectations.

“It may be time to look at areas that have been out of favour and have become attractive from a valuation standpoint. Certain sectors such as utilities, REITS, biotechnology and alternative energy are potentially more interesting in this environment of lower inflation and interest rates. This is the type of situation where active managers can be nimble in allocating earlier to those parts of the market that we think will be the future winners.”

Investment in private markets continues to grow with nearly half of all advisers surveyed (48.8%) already offering a private markets investment solution to clients, with 21.3% of advisers planning to do so in the next 1-2 years (slightly up from the global figure – 18.7%).  It is now regarded as a core component of portfolio construction for wealth investors. Key reasons for allocating to private markets include higher returns and greater portfolio diversification. More than half (53.6%) of Australian respondents wish to increase allocations to private equity in the next 12 months, followed by 46.4% in private debt and 39.3% in renewable infrastructure equity.

Georg Wunderlin, CEO, Schroders Capital, said: “Private markets are an essential source of creative and long-term capital to finance fundamental structural shifts in our societies – driven by decarbonisation, deglobalisation, demographics and the AI revolution. Investors are recognising the potential of private assets to drive positive change, and, therefore, higher returns.

“In addition, private assets are valued as a source of diversification. Following shifts in the rate environment private market investments are at a pivotal moment. What is required in the future is even deeper skills of managers to source, execute and manage private assets. Consequently, investors must be increasingly selective and partner with/work with managers that possess the ability to control value creation.

“It is crucial to enable not only institutional but also individual investors to profit from the benefits of private markets investments. Accessibility of private asset classes has improved significantly in recent years on the back of a much greater array of fund structures aimed at individual investors. We see it as a key mission for us to continue to drive this trend.”

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Due to the structural changes to these teams, Stuart Dear will leave Schroders after 11 years with the business.  He was most recently the head of Australian fixed income, a role he held since July 2021. Mr Dear leaves Schroders Australia with the team’s very best wishes for his future success.

Schroders Australia CEO, Simon Doyle, said Mr Mullins and Ms Wood are solid investment leaders with strong track records, are well known to the market and will work closely to lead this combined team.

“In making these adjustments to the Fixed Income and Multi-Asset team structure and leadership, we believe we are positioning ourselves for future success in these two important asset classes, to which we remain firmly committed.  Sebastian is a talented investor and natural leader. Having worked closely with Sebastian in the Multi-Asset team, I’m confident he will continue to deliver exceptional investment outcomes for our clients.  He will be a strong, future-focussed head of the combined multi-asset and fixed income capability.

“Kellie’s promotion is also well deserved, and her passion for fixed income and her talent as a fixed income investor is rewarded with this opportunity. Sebastian and Kellie are supported by 13 investment professionals within the merged local team and the Schroders global investment teams of over 400 investment professionals in numerous countries.

“Schroders is optimistic about the outlook for these asset classes and remains committed to delivering active fixed income and multi-asset solutions to our clients in Australia and New Zealand. These changes seek to ensure we are making the best use of our local resources and signify our strong commitment to providing leading investment solutions tailored to our clients’ needs.

“Schroders has an expansive global investment platform and presence in 38 locations.  In Australia, we have a long-standing 60-year commitment to serving and partnering with clients through locally based investment manufacturing capabilities in equities, fixed income, multi-asset, and private assets.  We are uniquely positioned to assist Australian clients to solve their investment challenges.”

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Mr Fernandez has over 20 years’ experience in product distribution, and was most recently distribution manager for Copia Investment Partners – a position he held for five years. Prior to that he spent four years as national sales manager at Paradice Investment Management.

Notably, Mr Fernandez has a strong history with Schroders, having worked with the company for almost ten years from 2005 to 2015, during which he made significant contributions and earned high regard from colleagues and clients. He has also worked for State Street and CBA.

Schroders Australia CEO and CIO, Simon Doyle, said Mr Fernandez brings a wealth of experience to the role.

“Jude is a well-respected, passionate, and collaborative sales leader, who has established strong connections with our wealth clients across various levels and geographies. I am confident that he will make an immediate and valuable contribution to the firm.

“He has a proven track record gained, not only during his time at Schroders, but also over the past nine years which have been spent in distribution roles.

“His background and experience round out the skill set of the distribution team. He is an excellent fit with the business.

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Simon Doyle

Traditional asset allocation may not suit the new world of higher interest rates and higher inflation and a more dynamic approach to portfolio construction will be required to generate attractive returns as stock markets come under pressure, according to Schroders Australia.

The ability to move between different asset classes will be a key to boosting portfolio performance and helping provide downside protection, as returns from share markets fall from their highs of recent years, according to Simon Doyle, CEO and CIO for Schroders in Australia.

“We think inflation will be generally higher and more difficult to keep close to 2 per cent. Share markets are likely to be more volatile than investors have been used to over the past few years as the world changes,” Mr Doyle said.

He predicts the returns from Australian shares over the next three years will sit just below 7 per cent a year, compared to a historical average of 8 to 10 per cent.

“Australia is looking better than the United States (US), which still looks quite challenged from a valuation perspective. There is potential for more downside in the US in the short term. We are positive structurally on commodities, which could be a source of upside return for Australia’s share market, which is one of our preferred share markets.”

According to Doyle, the world has been living in an age of abundance but, due to several converging forces, has moved into an age of scarcity, with no more cheap labour or cheap energy and with higher interest rates increasing the cost of capital. 

“We believe this will lead to greater cyclical and market volatility,  which has significant implications for investment markets and more importantly, the investment framework investors use to build portfolios,” said Doyle.

“Active management and asset allocation will become more important than it has been in the past.”

“In the current environment, asset breadth is good, backed up by active management, to allow investors to navigate a more challenging path forward – but also a rewarding one if investors get it right.”

Sebastian Mullins, head of multi-asset in Australia, says higher inflation and higher rates will affect asset allocation directly.

“These conditions of higher inflation and interest rates will demand more active tactical asset allocation in portfolio construction. As the cost of capital rises, company earnings will be under greater pressure.” 

“We have adopted a value bias, and favour companies which we consider to have cheaper multiples and quality, inflation linked earnings. Those with extreme valuations will likely come under pressure,” said Mr Mullins.

“When it comes to duration, being more active in terms of which country, duration selection and currency selection will matter.”

Mr Mullins said investors will also need to adopt a more flexible approach to portfolio construction. 

“The way investors implement a 60:40 portfolio is important – and that comes down to the risk tolerance of an investor and their adviser. From our perspective, it is about being more dynamic and knowing when to add more or less to a portfolio There are some great opportunities in both the 60 and the 40 for active investors.”

“If you are stuck in the 60:40 regime, what you put in the 40 per cent will depend on the economic environment. But the yield being offered on that 40 per cent is a lot higher than it has been in the past, and if you are a retiree, you want to access that yield. There are good opportunities to increase the yield aspect of your portfolio in this higher inflation environment,” Mr Mullins said.

The Schroder Real Return Fund is a multi-asset fund providing diversified exposure across defensive, growth and alternative assets. This actively managed fund aims to achieve a return of CPI* plus 4 per cent to 5 per cent a year before fees over rolling 3-year periods while minimising the size and frequency of negative returns.

By diversifying across a wide range of asset classes, sectors and regions and actively managing the asset allocation, the fund seeks to achieve long-term growth and manage downside risks as markets rise and fall.

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Simon Doyle

Schroders Australia (SIMAL) has appointed Simon Doyle as chief executive officer, alongside his ongoing role of chief investment officer, a position he has held since February 2022.

This is part of an important and future-focused evolution of the Australian business, reinforcing Schroders’ commitment to being investment-first and insight-led. Schroders recognises the critical importance and value of our investment proposition to clients and the need to tailor our capabilities to help solve their specific needs.

Simon succeeds Sam Hallinan who has led the Australian business since April 2021 through a period of significant industry change and societal disruption. We are grateful for the contribution Sam made to Schroders during this period and he leaves with our best wishes.

Simon is a deeply experienced investor with over 20 years of experience at Schroders alone, having joined the business in 2003. During his tenure Simon has successfully developed and managed our Fixed Income, Multi-Asset, and Private Debt teams. Simon will continue in his investment role as CIO alongside a deeply experienced team of investment professionals who lead our locally-manufactured capabilities, including Australian equities under Martin Conlon and Andrew Fleming, fixed income under Stuart Dear and Kellie Wood and private debt under Nicole Kidd.

In addition, we are announcing the promotion of Sebastian Mullins to the role of head of multi-asset. Sebastian has served as deputy head of multi-asset since February 2022, having joined Schroders in 2019. He has 12 years of multi-asset investing and will lead a team of deeply experienced investment professionals. Over time we expect to recruit additional talent into the multi-asset team.

Commenting on Simon’s appointment, Chris Durack, head of Schroders Asia Pacific, said, “Simon’s new dual CEO and CIO role reflects our ongoing commitment to helping solve for our clients by being an investment-first and insight-led business in Australia, and allows for further direct engagement on investment solutions with our clients, the needs of whom are becoming increasingly complex. Simon is highly regarded internally both locally and globally across the Schroders business and is well-known within the market and amongst our clients.”

Peter Harrison, global chief executive officer for Schroders, said: “These leadership changes signify our unwavering commitment to providing exceptional investment solutions tailored to our clients’ specific needs. Under Simon’s leadership, and with an investment-led approach supported by our locally-based investment teams, we are confident in our ability to continue delivering outstanding results for our clients.”

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Stephanie Hukins

Impact investing is now viewed among the key pillars of sustainable investing, alongside integration and positive screening, Schroders Institutional Investor Study 2022 has found.

Schroders’ flagship annual institutional study, first launched in 2017, is an influential bellwether of the investment appetite of investors globally, spanning 770 investors and US$27.5 trillion in assets.

Just under half (48%) of Australian institutional investors, as well as investors globally, said impact investing was their preferred approach to implementing sustainability, a significant increase on 27% a year ago and 25% in 2020. The Study also found that the importance of full ESG integration into the investment process had grown as a focus, further cementing it as the most favoured approach among investors.

Q. What is your preferred approach to implementing sustainable investments?

Growing demand for investment solutions focused on the energy transition was also reflected in the findings. Three-quarters of Australian institutional investors said that new investment opportunities addressing the energy transition would encourage them to invest more into sustainable investments, a significantly higher number than the global (59%) and Asia Pacific (62%) average.

Q. What would encourage you to invest more in sustainable investments?

Sustainable investment performance concerns

At the same time, performance concerns over investing sustainably have ticked up over the past 12 months, with 64% of Australian investors citing this as a challenge compared with 49% a year ago. This is a significant reversal with worries about performance remaining stable in recent years, and likely reflects the more challenged market environment. The Australian result was similar to Asia Pacific (61%) but above the global figure of 53%. Greenwashing, difficulty in measuring and managing risk and cost were also recognised as some of the major obstacles holding investors back from investing sustainably.

Engagement remains a key focus for investors globally with 59% stating that tangible evidence of real world outcomes was the most important component of any active ownership strategy (57% of Australian investors). Specifically, 80% of Australian investors believed governance (e.g. transparency of voting and shareholder resolutions) was the top engagement theme, a result that was significantly higher than Asia Pacific (72%) and global (64%) investors. A focus on human rights and the climate completed the top three in terms of engagement priorities. Natural capital and biodiversity also emerged as a new area of engagement focus for Australian institutional investors in 2022.

Encouragingly, over four in ten Australian investors (41%) said they had committed to reaching net zero by 2050, slightly above the global result of 37%. European investors are leading the field on this point, ahead of those in Latin America, Asia Pacific and North America.

Q. Where are you on your path to net zero?

Stephanie Hukins, Sustainability Investment Director, Australia, commented: “The findings of this year’s Study demonstrate that institutional investors increasingly want to measure, manage and deliver impact. Whilst ESG integration within the investment process is the preferred approach to implementing sustainable investments, impact investing saw the most dramatic increase over the year, rising from 27% of investors to 48%.

“Interestingly, whilst regulatory and industry pressure remain important influences on Australian institutional investors, the desire to better align portfolios to corporate values, and at the same time positively impact society and the planet, have jumped ahead as the two leading reasons driving sustainable investments this year.

“We see from this year’s Study that there is a strong desire from both global and local institutional investors to support the energy transition which has been identified as a key priority for sustainable investing going forward.

“Australian investors, along with their global counterparts, place a high importance on engagement. Schroders’ market-leading Engagement Blueprint^[1], published this year, is setting new standards on active ownership as it maps out our ambitions and how we look to engage with companies to support and drive progress.

Investment outlook

More broadly, investors’ return expectations for the next five years have deteriorated compared with a year ago, compounded by significant concerns over the impact of rising inflation and interest rates, as well as geopolitical uncertainty growing and fears over a global slowdown, as shown below. Inflation was the top concern for Australian investors (34%) followed by rising interest rates (21%) and geopolitical uncertainty (19%). 

Q. Which one worries you the most?

Amid a more challenged outlook, the Study did however find that global investors’ confidence in achieving their returns has remained steady – most likely the result of their scaled back expectations. In Australia, 4% of investors were not confident at all of achieving their return expectations, whilst 91% were either confident, or somewhat confident of achieving return expectations.

Interestingly, concerns over global pandemics have markedly fallen in importance as an issue for investors compared with the previous two years.

Simon Doyle, Schroders CIO and Head of Multi-Asset, Australia, commented: “The misalignment between policy settings, economic outcomes and asset prices continues to influence markets, creating a challenging investment environment. The Study showed that for investors, rising interest rates, inflation and the threat of global conflict, were key sources of concern.

The Survey results show that institutional investors have reduced their allocations to equities, which is consistent with our own portfolio positioning. For the year ahead Australian investors anticipate a slight upweighting to equities, with stable allocations to other asset classes. In contrast, we remain cautious as while equity prices have responded to higher interest rates, earnings and earnings expectations haven’t. The risk of recession is significant as central banks raise rates to rein in demand and curtail inflation. 

As an active manager, Schroders is focused on managing through the current market challenges on behalf of our clients in Australia and around the world.

——–

[1] https://www.schroders.com/en/media-relations/newsroom/all_news_releases/schroders-unveils-engagement-blueprint-to-highlight-global-active-ownership-priorities/

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