Professional Fund Buyers Anticipate Volatility and Opportunity
Highlights
- Eight in ten (79%) professional fund buyers globally say the current environment favors active managers.
- Top sources of volatility for 2017: geopolitical events, interest rates and China market woes.
- Top investment objective in 2017: delivering higher risk-adjusted returns.
- Turning to alternatives seeking to add alpha and diversify portfolio risk.
- Growing concern around interest rate risk as the Fed increases rates in the US.
Professional buyers believe that higher levels of market volatility are likely to result in greater dispersion in equity returns. Nearly all of those surveyed (95%) said they would choose active management over passive investments for generating alpha, while active management is also the preferred route to gain exposure to non-correlated asset classes (74%) and emerging markets (77%). Respondents favored passive investments for minimizing management fees.
“Investors are clearly concerned that these historically low volatility levels cannot last in the face of global political and monetary policy change,” said Robert Hussey, Executive Vice President of the Institutional Services Group. “Professional fund buyers see volatility as an opportunity, and are looking to active management and alternative investments to both generate alpha and manage risk.”
Although professional buyers anticipate greater volatility in the year ahead and are concerned about investors taking on too much risk, they are not shying away from adopting risk, which is reflected in their market outlook and asset allocation calls. Professional fund buyers are resetting strategy to ensure they are positioned for volatile, uncertain markets. Three-quarters (74%) pointed to alternative investments as a means to diversifying portfolio risk.
When it comes to asset allocation, the consensus view among professional buyers is that emerging market stocks will shine in 2017, with 47% projecting this as the bright spot among equity sectors. In pursuing emerging market opportunities, fund buyers are looking to Asia ex-Japan to provide the best performance in 2017.
Investing involves risk, including risk of loss. Alternative investments involve unique risks that may be different from those associated with traditional investments, including illiquidity and the potential for amplified losses or gains. Investors should fully understand the risks associated with any investment prior to investing. Diversification does not guarantee a profit or protect against a loss.
Alpha is a measure of the difference between a portfolio's actual returns and its expected performance, given its level of systematic market risk.
Methodology
Natixis’ 2016 Survey of Wholesale Portfolio Managers includes the insights and opinions of 200 professional fund buyers across 28 countries in Europe, the Americas, the Middle East and Asia. Data was gathered in October and November 2016 by the research firm CoreData. For more information, visit www.durableportfolios.com.
About Natixis Global Asset Management
Natixis Global Asset Management serves thoughtful investment professionals worldwide with more insightful ways to invest. Through our Durable Portfolio Construction® approach, we focus on risk to help them construct more strategic portfolios that seek to endure today’s unpredictable markets. We draw from deep investor and industry insights and partner closely with our clients to put objective data behind the discussion.
Natixis Global Asset Management is ranked among the world’s largest asset management firms.1 Uniting over 20 specialized investment managers globally ($877 billion AUM2), we bring a diverse range of solutions to every strategic opportunity. From insight to action, Natixis Global Asset Management helps our clients better serve their own with more durable portfolios.
Headquartered in Paris and Boston, Natixis Global Asset Management, S.A. is part of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Global Asset Management, S.A.’s affiliated investment management firms and distribution and service groups include Active Index Advisors®;3 AEW Capital Management; AEW Europe; AlphaSimplex Group; Axeltis; Darius Capital Partners; DNCA Investments;4 Dorval Asset Management;5 Emerise;6 Gateway Investment Advisers; H2O Asset Management;5 Harris Associates; Loomis, Sayles & Company; Managed Portfolio Advisors®;3 McDonnell Investment Management; Mirova;5 Natixis Asset Management; Ossiam; Seeyond;7 Vaughan Nelson Investment Management; Vega Investment Managers; and Natixis Global Asset Management Private Equity, which includes Seventure Partners, Naxicap Partners, Alliance Entreprendre, Euro Private Equity, Caspian Private Equity and Eagle Asia Partners. Visit ngam.natixis.com for more information.
Some affiliates may not be available in all jurisdictions.
2 Net asset value as of December 31, 2016. Assets under management (AUM) may include assets for which non-regulatory AUM services are provided. Non-regulatory AUM includes assets which do not fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part 1.
3 A division of NGAM Advisors, L.P.
4 A brand of DNCA Finance.
5 A subsidiary of Natixis Asset Management.
6 A brand of Natixis Asset Management and Natixis Asset Management Asia Limited, based in Singapore and Paris.
7 A brand of Natixis Asset Management.
1788118.1.1