Confidence in the ability of over-leveraged economies to reduce their debt is on the wane, according to the latest Barings Investment Barometer.

In the latest quarterly survey, 65% of investment professionals considered economies’ ability to reduce debt as the biggest global macroeconomic challenge, up from 51% in the previous survey.

In a statement announcing the results, Barings said fears of a second banking crisis have decreased by half compared to the previous quarter, at 15%. However, concerns around the prospect of a double-dip recession rose, to 12% from 7% the previous quarter.

The impact of inflation on cash investments was tipped to be the biggest concern for clients of 82% of investment professionals, while 79% said their clients have already, or plan to, reallocate cash investments to inflation-protected assets. 80% of respondents were negative on cash as an asset class.

Market volatility has led 82% of intermediaries to advise their clients to further diversify their assets - an increase from 73% in the last poll. Multi asset products are growing in favourability according to the survey, with 35% of investment professionals encouraging their clients to invest in these types of strategies, up from 26%.

Head of UK Retail Distribution at Barings, Rod Aldridge, said it was reassuring that investment professionals continue to place such focus on greater diversification of assets.

“As the search for growth continues and conditions for investing in emerging markets remain compelling, we believe strongly that they represent fair value and have positive prospects for investment return. Regularly reviewing clients’ portfolios to best mitigate the risks of volatility is crucial in this environment. The increasing shift towards multi asset products could certainly help to combat ongoing market restlessness.”

Emerging market equities, global equities and Asian equities (ex Japan) remain at the top of the leaderboard in the ranking of investment professionals’ most favoured asset classes at 94%, 91% and 92% respectively. 46% of investment professionals are encouraging investors to increase their allocation to emerging market equities, while 36% believe now is the time for investors to increase exposure to Asian equities.

However, fixed income is less favourably viewed, with 64% of respondents advising clients to decrease their exposure to fixed income.

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