According to the results of nrpn’s third quarterly institutional investor survey, which polled 12 pension and insurance funds with ?24.6bn of assets under management, investors in the Nordic region have little or no interest in the field of socially responsible investment (SRI).

Of all the respondents polled not one said that it intends to gain any exposure to SRI over the next six months while only one investor said that it already has some kind of SRI allocation.

“If there is no pressure from the EU, SRI development will be very slow,” says Sampo Fund Management of Finnish investors. “Pensions funds in Finland have not really been involved in it.”

Sweden’s Banco Fonder agrees with this assertion: “The smaller pro-active players will continue to drive the agenda, whereas the larger pension funds will continue the reactive, issue specific and ad-hoc approach to SRI.”

But while investors were very pessimistic about SRI, they were conversely upbeat about the returns from European and Nordic equities. Over the next six months respondents expect European stocks to pull in returns of 7.5 per cent – compared to 6.5 per cent in our last survey – with forecasts for Nordic equities set at 6.52 per cent.

Pessimism for the US

For both the US and Japanese stocks, however, investors have scaled back their equity market predictions by around 50 per cent compared to the results of our last survey. Forecasts for US equities were reduced by almost four percentage points to 3.3 per cent from 7.25 per cent, while predictions for Japanese stocks were cut from 9.5 per cent to 6 per cent. At the same time, forecasts for emerging market equities were pushed up by 1.5 percentage points to 11.25 per cent.

Interestingly, the survey also found that investors have – on average – reduced exposure to equities from 40 per cent to 31 per cent compared to the results of nrpn’s winter study. Respondents average allocation to fixed income correspondingly increased from 47.58 per cent to 48 per cent.

When asked what would be the most attractive of all the fixed income asset classes over the next six months, five investors said that emerging market bonds would be the most interesting, five said that government bonds would be the most attractive, two plumped for high yield paper and just one respondent felt that corporate bonds would have the most return potential.

"Looking ahead, we remain positive over the fundamentals in emerging markets," John Cleary, CIO at specialist emerging market bond house Standard Asset Management, told nrpn. "GDP growth in the developing world is expected to top 5.5 per cent during 2006, commodity prices are set to remain high and there is a healthy credit rating upgrade pipeline in the year ahead."

Indeed, three investors said that they would increase their exposure to fixed income over the next six months although five respondents said that they intend to cut into their bond holdings before September. At the same time, six investors said that they plan to increase their allocation to private equity, four intend to up their exposure to equities and three plan to beef up their property holdings. Four respondents said that they will reduce their equity holdings and two plan to cut into their money market exposure.

The survey also asked investors to predict how many times they expect the US Federal Reserve will increase interest rates over the next six months and – in contrast with previous findings – the majority (six) expects the Fed to increase rates at least once before September, while four investors expect the Fed to increase rates twice. Not one investor believes that interest rates will remain unchanged and two expect rates to rise three times. In our previous survey the majority of respondents (five) expected rates to increase twice.

Out of the polled investors 11 said that they expect world growth prospects to remain positive over the next six months with one respondent expecting growth prospects to remain neutral. Not one expects growth prospects to be negative.

Oil price expected to continue to rise after foiled terrorist attack

Investors are in agreement that the price of US oil will end up above $55 a barrel in six months’ time – according to the results of our latest survey, which took in 12 pension and insurance funds with 􀀠 24.6bn of assets under management.

Ten investors said that prices would settle somewhere between $55 and $64 a barrel and two said that prices would end up in excess of $65.

Not one investor said that prices would fall below $54 over the next six months.

In our winter study the majority of investors (six) predicted that prices would end up in the $45 to $54 range while only three respondents said that prices would settle somewhere between $55 and $64. One investor expected prices to rise above $65.

As of 1 March 2006 a barrel of light crude was quoted at $61, falling from $63 per barrel on news of a foiled terrorist attack against a Saudi Arabian processing facility.

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