On
\nthe other hand, allocations to passive slide for the third year in a row, according to a new study released today
\nby Natixis Investment Managers. <\/p>\n
To position their portfolios for the volatility they expect as central banks gradually remove the monetary life
\nsupport system in place since the financial crisis, they are also increasing allocations to non-traditional assets,
\nincluding private equity, private debt, infrastructure and real estate, as they seek alternatives to bonds and hunt
\nfor higher returns in a crowded market.<\/p>\n
Jean-Fran\u00e7ois Baralon, Head of Distribution for France, French-speaking Switzerland and Monaco at Navigating active markets<\/strong><\/p>\n Comparing passive and active approaches directly, a 57% majority say active managers outperform passive in Jean-Fran\u00e7ois Baralon continues, \u201cManaging downside risks will be more of a challenge in 2018 \u2013 but the Asset bubbles and equity volatility<\/strong><\/p>\n An overwhelming three-quarters of institutions (77%) believe a prolonged period of low interest rates has led to Yet renewed volatility (rather than a sustained correction) is set to be the main feature for equities in 2018: an The hunt for diversification<\/strong><\/p>\n Institutional investors are placing greater faith in both equities and uncorrelated, alternative investments to help By contrast 78% say increasing the use of alternatives is an effective way to manage risk. Within alternatives, In terms of sector picks: more institutions (45%) expect the technology sector to outperform the market in 2018 In direct competition to fixed income, more than three quarters of institutional investors now say that private A longer-term view on the sustainability of returns is also emerging. Three-in-five (60%) institutions now say Jean-Fran\u00e7ois Baralon concludes, \u201cInstitutional investors worldwide are steeling themselves for the possible Two-thirds of institutional investors worldwide (65%) expect asset bubbles to negatively impact performance inThe survey found 59% believe that volatility has been artificially suppressed by flows into passive investment
\nstrategies. More than half (57%) believe the increase in passive investing is distorting relative stock prices and
\ncreating systemic market risks (63%), of which 72% believe individual investors aren\u2019t yet aware.<\/quote><\/p>\n
\nNatixis Investment Managers, comments, \u201cInstitutional investors around the globe are wary of fragile market
\nconditions, distorted asset prices and systemic risks caused by central bank interventions and the growing
\npopularity of passive investments, and they continue to turn to active management to manage current market
\nconditions. They are confident their own portfolios are built to weather future market conditions, but warn that
\nindividual investors are not aware of the systemic market risks posed by passive investing.\u201d<\/em><\/p>\n
\nthe long run. Three-quarters of institutions (75%) say active managers are better at accessing emerging market
\nopportunities \u2013 and a similar proportion (74%) say active managers provide better exposure to non-correlated
\nasset classes.<\/p>\n
\nNew Year should also be seen as an opportunity. Volatility can boost returns for those able to take advantage;
\nhowever institutions without a truly diverse and durable portfolio risk reacting to market corrections and volatility
\n\u2013 rather than profiting from such movements. Markets look set for a more lively and volatile 2018, and active
\nmarkets will therefore demand far more active thinking.\u201d<\/em><\/p>\n
\nthe creation of asset bubbles. Moreover, looking ahead, 62% of institutional investors see interest rate rises as
\nthe top portfolio concern for 2018 \u2013 a potential trigger for a correction in fixed income values.<\/p>\nThe survey also found asset bubbles rival geopolitical events \u2013 a concern for 74% following recent events \u2013 and
\nasset bubbles rank ahead of interest rate increases (61%) as the factor institutions believe will have the most
\nnegative impact on their investment performance in 2018.<\/quote><\/p>\n
\noverwhelming 78% of institutions expect an increase in equity volatility next year. Looking back on the absence
\nof volatility this year, a majority of institutional investors (59%) believe this is unsustainable and is in fact a
\ncause for serious concern.<\/p>\n
\nthem ride out such market challenges. Almost two-thirds (64%) say fixed income is no longer providing its
\ntraditional risk management role in portfolios, while 60% of institutions now believe traditional assets in general
\nare too highly correlated to provide distinctive sources of return.<\/p>\n
\nthere is also an appetite for illiquidity, as 74% believe potential returns make such investments worth the risk
\nassociated with fixed timeframes. Private equity is the most popular example with 39% of institutions increasing
\ntheir private equity investments \u2013 and two-thirds (67%) are satisfied with the performance of private equity
\ninvestments in their portfolio.<\/p>\n
\nabove any other sector, followed by healthcare (44%), defense\/aerospace (43%) and financials (41%).<\/p>\n
\ndebt provides higher risk-adjusted returns than fixed income vehicles \u2013 and 36% of institutions are currently
\nincreasing their private debt holdings.<\/p>\n
\nincorporating Environmental and Social Governance (ESG) practices will be standard for all managers within
\nthe next five years. This appears to be for practical purposes as much as moral; a similar majority (59%) say
\nthere is alpha to be found in ESG investing.<\/p>\n
\nemergence \u2013 and correction \u2013 of asset bubbles, alongside interest rate hikes and increased volatility. Beyond
\nthe traditional interplay of fixed income and equities, we\u2019re also seeing many institutional investors seek refuge
\nin alternative investment strategies, as they look to protect and diversify their portfolios while also generating
\nsatisfactory returns. Instead of the long-standing hunt for yield, we are seeing an emerging scrutiny of portfolios
\n\u2013 and a new hunt for diversification.\u201d <\/em> <\/p>\n","protected":false},"excerpt":{"rendered":"
\n2018 and three out of every four (75%) believe the current market environment favors active management.<\/p>\n","protected":false},"author":20,"featured_media":67640,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1809,1655,1659,1651,2087,2068,1678],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/67642"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=67642"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/67642\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/67640"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=67642"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=67642"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=67642"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}