Institutional Asset Manager Newsletter 25.04.25

Cash is the best

In a change of heart few might have predicted, US President says Donald Trump has declared his government will "live together very happily" with China, promising to reconsider the 145 per cent trade tariffs imposed earlier this month.
Hoping for a thawing in relations between the two nations embroiled in a trade war initiated by Trump in what Anthony Willis, Senior Economist at Columbia Threadneedle Investments, called an "undoubted act of economic self-harm by the US", tariffs are set to come down.
However, as we report this week, market sentiment remains gloomy and institutional investors continue to battle with persistent market volatility and the threat of recession.
The Bank of America (BofA) European fund manager survey finds 82 per cent of participants think the global economy will weaken over the coming year - the highest figure in the research’s 25-year history – thanks to tariff increases. And recession fears are on the rise, with 49 per cent seeing a hard landing as the most likely scenario for the global economy over the coming 12 months, up from only 11 per cent last month.
Admittedly the survey was conducted before Trump’s latest U-tun on China, but given the US administration’s current trajectory, there is little to suggest that we can enjoy calmer markets any time soon.
And so timely insights from the Northern Trust Asset Owners in Focus: Global Asset Owner Peer Study 2025, which explores how institutional investors worldwide plan to tackle challenges ranging from rising market volatility.
Diversification remains a strong theme with asset managers bolstering their mainstay holdings of equities - which account for 42 per cent of the survey participant’s portfolios – and fixed income at 27 per cent, with private markets.
Yet uncertainty drives investors to safety and liquidity management has gained importance, with cash allocations accounting for 11 per cent of portfolios globally.
This reflects the trends in the BofA European fund manager survey which finds the average cash position among European investors stands at 4.5 per cent, up from 3.8 per cent last month, while cash levels among global investors hit 4.8 per cent, up from 4.1 per cent in March.
However, before investors rush to cash, it would be worth reading our thought piece from Shaheer Guirguis, Head of Secured Finance at Insight Investment, who notes there exists a class of assets that, "while often dismissed due to their perceived illiquidity, can offer substantial benefits when managed correctly".
Guirguis highlights the benefits of secured finance assets – asset backed loans for example - which despite being relatively illiquid to trade, can provide the necessary cashflows and play a valuable role in a broad investment portfolio.
Clearly, secured finance assets are not as accessible cash and for that investors receive an illiquidity premium, but Guirguis argues that they may "still be completely capable of meeting an investor’s cashflow needs".
He says: "As the investment landscape continues to evolve, it is crucial to recognise the potential of illiquid assets and the role they can play in achieving financial goals."

Gill Wadsworth, Editor, Institutional Asset Manager
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