Debt-ridden economies and rising inflation rates represent the biggest threats to investment growth over the next six months, while equities remain investment professionals’ most favoured asset class, according to the latest survey of the wealth management industry from Barings.

The Barings Investment Barometer, which surveys investment professionals every quarter, says 65 per cent of respondents identified the ability of over-leveraged economies to reduce their debt as the biggest global macroeconomic investment challenge over the next six months. The new result represents a drop in confidence in the ability of debtor nations to meet their obligations as last quarter only 51 per cent of surveyed professionals identified this factor as the biggest challenge.

The eurozone sovereign debt crisis also continues to concern those surveyed, although the proportion of respondents that chose this option decreased slightly from 68 per cent last quarter to 65 per cent.

Fears over rising inflation rates are also growing; 42 per cent of respondents suggested inflation poses a challenge to investment growth, compared with just 32 per cent last quarter. And 82 per cent of the wealth professionals said the impact of inflation on cash investments is their clients' biggest concern: 79 per cent said their clients have already reallocated cash investments to inflation-protected assets, or plan to. Eighty per cent of respondents were negative on cash as an asset class.

However, the outlook is not unremittingly gloomy; fears of a second banking crisis have decreased from 30 per cent last quarter to just 15 per cent, although over the same three months respondents became more concerned about the prospect of a double-dip recession, up to 12 per cent from 7 per cent.

According to the survey, emerging market equities, global equities and Asian equities (excluding Japan) remain investment professionals’ most favoured asset classes, chosen by 94 per cent, 91 per cent and 92 per cent of respondents respectively.

Nearly half (46 per cent) of investment professionals are encouraging clients to increase their allocation to emerging market equities, and 36 per cent believe their clients would be wise to increase exposure to Asian equities now. Fixed income is less favourably viewed - 64 per cent of respondents are advising clients to decrease their exposure to the asset class.

"Against the current backdrop of market volatility and uncertainty, it is reassuring that investment professionals continue to place such focus on greater diversification of assets,” said Rod Aldridge, Barings’ head of UK retail distribution. “The increasing shift towards multi-asset products could certainly help to combat ongoing market restlessness.”