Two thirds of institutional investors globally increasingly see extreme risks as a threat. Nevertheless, 27 percent of these investors state that they protect themselves and hedge against these threats. This is what the Global RiskMonitor of Allianz Global Investors shows.

Institutional investors are increasingly worried about a bubble in certain asset classes, about geopolitical tension, or a shock in the oil markets. Because of the fact that all financial markets are systemically connected globally, these kinds of events that bring about extreme risk are happening more frequently.

Worries about a recession

Although 66 percent of the more than 700 surveyed investors indicated that they are concerned, the large majority is counting on traditional asset allocation strategies and risk management to protect their portfolios. 6 out of 10 investors state they will focus on diversification across different segments. The same goes for geographic diversification. Only a third of the surveyed investors indicated they will actually manage the extreme risks.

Elizabeth Corley, CEO of Allianz Global Investors, stated that it is strange to hear from the majority that they are worried about extreme risks, while only a minority is prepared to tackle them. Active managers have an important part to play to estimate the negative consequences for their customers when an extreme event happens. Furthermore they need to help control these and point out opportunities when they present themselves.

Recession, Europe, bankrupt

Investors are worried among other things about a new threat on the oil market (28%). Also governments going broke (24%) and the political situation in Europe (24%) is keeping them up at night. 25 percent is worried about new bubbles in certain asset classes and about 1 in 5 investors is worried about a recession in the Eurozone.