The Eurozone debt crisis and the prospect of a second banking crisis are the biggest concerns of investment professionals, according to the latest Barings Investment Barometer survey.

The quarterly survey found that 78% cited the Eurozone crisis as the biggest global macroeconomic challenge facing investors in the next six months, compared to 65% who saw this as a significant challenge in the last survey and 51% at the start of the year.

The prospect of a second banking crisis is a concern to 41% of investment professionals, a significant increase from 15% who cited it as a concern in the last survey. The ability of over-leveraged economies to reduce their debt is a major challenge to investment growth for 74%, compared with 65% in the previous quarter.

The barometer also found that 77% remain concerned about the impact of inflation on their cash investments; 70% were negative on cash as an asset class; and 89% said their clients plan to reallocate cash investment to inflation-protected assets, or have already done so.

Similar to last survey’s results, 76.5% of advisers are still most likely to encourage their clients to diversify their assets in order to navigate the current levels of market volatility, while 49% would advise more regular reviews of their investment portfolios. Due to the growing macroeconomic concerns investors are facing, more clients are being advised to de-risk their portfolio, up to 34% from 27% in the last quarter.

Global equities are seen as the most attractive asset class by 90% of respondents, followed by emerging markets and Asian ex-Japan equities (89% and 86% respectively). Fixed income has increased in popularity from 39% in the last survey to 66% of respondents being favourable to the asset class. Emerging markets remains the most popular asset class for 46% of investment professionals, while 37% encourage investors to increase their exposure to Asian equities and 31% favour multi-asset funds.

Rod Aldridge, Head of UK Retail Distribution at Barings, commented: “The growing concern among investment professionals regarding the outlook for Europe, and the belief that a second banking crisis is becoming more likely, was to be expected given recent headlines, but it is encouraging that investment professionals continue to place such a great emphasis on diversification of assets in order to navigate these recent uncomfortable levels of volatility.

“As the search for growth continues, the popularity of emerging market and Asian ex-Japan equities supports the compelling stories that these markets have to offer. However, the revived favourability towards fixed income perhaps reflects the increasing desire of investors to remove a certain amount of risk from their portfolios.”

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