Institutional investors reckon world political and economic
events could push the level of market volatility higher in
2017, prompting many to reset their portfolios and rely more on
active management and alternative assets.
That's the key finding of a study by Natixis Global Asset
Management (GAM), the investment arm of the French bank, which
recently polled 500 fund houses.
Volatility topped the list of concerns for next year, with
65% pointing to geopolitical events, 38% citing the US
elections, and 37% noting the potential for changing interest
"Unprecedented economic and political forces around the
world are the top concern for institutions in 2017," said John
Hailer, chief executivie of Natixis GAM for the Americas and
Asia and head of global Distribution.
"In volatile markets, institutions are looking to active
management to strengthen returns and manage risk."
Especially in anticipation of higher volatility,
institutional investors favour active management over
73% said the current market environment is likely favorable
to active management. 78% are willing to pay a higher fee for
Nearly half (49%) reckon passive investing distorts
relative stock prices and risk-return trade-offs and 64% said
active management provides better risk-adjusted returns than
Over the longer-term, institutions project they will use
passive investments less than they previously believed.
Meanwhile, three-quarters (75%) of the professionals polled
sare unaware of the risks of passive strategies and have a
false sense of security about their use.
Half (50%) of surveyed institutional decision-makers across
the globe plan to increase their use of alternative strategies
in 2017, with two-thirds (67%) using them for diversification
and a third (31%) for risk mitigation.
Emerging market equities, high yield fixed income and
financials are other big winners.
US Presidential impact
The Natixis study showed that institutional
investors’ confidence suffered after the US
Prior to Donald Trump's victory, two-thirds of respondents
expressed confidence in their organisation’s
ability to handle the risks associated with investment
performance, which fell to only 53% among those surveyed after
The outlook for US and emerging market stocks also changed
substantially after the election.
Forty-three percent (43%) of investors surveyed before the
election said emerging markets would be the best-performing
equity market in 2017 compared to 31% of those surveyed after