POWERED BY MOMENTUM MEDIA
Institutional investors ramp up risk as market volatility subsides
Institutional investors have increased their risk exposure over June amid tempered levels of market volatility.
State Street has reported that institutional investors have ended the first half of 2025 “on a high note” through aggressive buying into risks as stocks soar to new heights.
According to State Street Markets’ head of equity research, Marija Veitmane, institutional investors continued to add risk to their portfolios over June, “perhaps spurred by falling market volatility”.
The State Street Risk Appetite Index was unchanged from its level in May at 0.36 by the end of June; however, institutional investors have taken the time to add more allocations into stocks, increasing their exposure by 0.7 per cent, sitting above levels recorded at the beginning of the year.
“Even though we have seen broad-based buying of risky assets, the largest build-up in risky positions was in asset allocation, equity and commodity asset classes,” Veitmane said. “Institutional investors have increased their allocation to stocks, mostly redeploying cash.”
This increase in risk appetite appears to be a continuation from the previous month, when investor sentiment had rebounded to its highest point since February, while long-term allocations to equities returned to levels last seen just before the “Liberation Day” announcement.
Head of APAC macro strategy at State Street, Dwyfor Evans, said at the time that the centrepiece of stronger risk sentiment was the strong increase in equity exposure relative to the fall in bond holdings (which decreased by 0.8 per cent over May).
Additionally, Evans told Super Review sister brand InvestorDaily that investors have not only been “dipping their toes back into US equities”, but they also began to target “less loved” areas, namely US tech.
He further suggested that the soon-to-expire 90-day delay in tariffs “emboldened investors to some degree”.
“Where this becomes interesting is what happens after the 90-day implementation delay runs out… if we have now seen the worst of the trade tariff announcements… then I think markets can probably live with more uncertainty on tariffs,” Evans told InvestorDaily in June.
“But, if [in] July and August, whether it’s global tariffs, or whether it’s Chinese tariffs, if we revert back to where we were at the beginning of April because of a lack of commitment in terms of trade agreements … that could realistically put a bit of an issue in terms of the risk trade again.”
Indeed, this appears to have further progressed, according to Veitmane.
“Within equities, we have seen consistent buying of US stocks, with the majority of the buying concentrated in the technology sector,” she said. “Buying of energy stocks and commodity currencies was also prominent, perhaps triggered by Middle East conflict-induced increase in oil prices.”
Looking towards the APAC region, Veitmane stated that Australia has “captured institutional investors’ imagination” over June.
“We have seen buying of stocks, bonds as well as AUD,” Veitmane said. “Domestic economic and earnings fundamentals are relatively strong, as the labour market continues to show strong signs of growth while wages steadily increase.
“Institutional investors have built large allocations to AUD, neutral positions in Australian banks, while equity holdings are still low.”
AUTHOR
Adrian Suljanovic
Recommended for you
Australian investors are increasingly integrating hedge funds and liquid alternatives into their portfolios, as persistent inflation volatility and global macro-economic instability expose the limitations of the classic 60/40 split.
US President Donald Trump’s decision to delay new tariffs has only prolonged the uncertainty weighing on global sharemarkets, according to AMP chief economist Shane Oliver.
BlackRock has reduced its exposure to Australian and European equities in favour of emerging markets.
Equity markets have surged ahead of fundamentals as institutional investors fall behind, according to Ten Cap Alpha Plus.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom 465 Calder Road Calder
99.46 3 y p.a(%)
2
DomaCom DFS Mortgage
95.46 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
78.55 3 y p.a(%)
4
BetaShares Crypto Innovators ETF
50.39 3 y p.a(%)
5
Global X GlobalX FANG+ ETF
47.50 3 y p.a(%)
