Large investors significantly increase allocations to alternatives in hunt for yield
Market volatility biggest risk to investment performance
Most investors will shorten bond durations when rates rise
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Natixis surveyed 660 institutional investors around the globe on their year-ahead market outlook and asset allocation plans. Institutional investors expect stocks to be the bestperforming assets in 2016, according to a survey released today by Natixis Global Asset Management. The study also found that investors believe global political tensions and changing interest rates will make markets volatile. In response, they plan to increase diversification and devote more of their portfolios to alternative assets.
The study found:
“Central bank policies, market volatility and other outside events have a big influence on institutional investors,” said John Hailer, Head of global distribution and Chief Executive Officer of Natixis Global Asset Management in the Americas and Asia. “They are eager to improve their income and performance in this environment. We’re seeing a surge in demand for innovative strategies that target specific needs across more diversified, complex portfolios.”
Mixing active and passive management
The findings favor a hybrid approach to active and passive investing. The survey found institutions are using actively managed investments to generate alpha and for exposure to noncorrelated assets, while they use passively managed investments primarily for equities and to minimize management fees.
Notably, two-thirds of investors (67%) believe world economic factors and higher market volatility will favor actively managed assets over passive investments in 2016.
Changing rates? Investors juggle bonds
Many countries, including the United States, are on the verge of raising rates. Others are holding steady or have recently cut rates. The divergence in policy is unsettling to many institutions and could contribute to volatility next year.
If the U.S. Federal Reserve and other central banks raise rates from their historic lows, institutional investors are poised to make several portfolio modifications. The majority (65%) will move from longer-duration bonds to those with shorter durations. Other adjustments include reducing their overall exposure to bonds (49%), raising their allocations to alternative investments (47%) and using absolute return strategies (47%).
“In a high volatility market context, with divergent monetary policies and global political unrest, institutional investors are increasing allocations to alternatives in a hunt for yield," explains Christophe Point, Managing Director of Natixis Global Asset Management Distribution for France, French-speaking Switzerland and Monaco. “These strategies are a source of diversification, a critical component to building a more durable portfolio over the long term", concludes Christophe Point.
Next Finance , December 2015
Article also available in : English | français
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