Managers Turning to Alternatives to Add Alpha and Diversify Portfolio
The majority of professional managers favor active management and alternative investments for alpha generation as they anticipate greater volatility and lower yields throughout the remainder of this year, according to a new survey by Natixis Global Asset Management.
Results of the company’s 2017 Wholesale Portfolio Manager survey, which polled 200 respondents (including discretionary portfolio managers and funds of funds) in 28 countries across the Americas, Europe, the Middle East and Asia, were contained in the company’s most recent Professional Fund Buyers Report.
The survey revealed that eight in ten (79%) professional fund buyers globally say the current environment favors active managers, while wholesale buyers expect geopolitical events (67%), interest rates (49%) and China market woes (36%) will be the top three sources of volatility for 2017. Other insights:
- The low-yield environment tops the list of risk management concerns (77%).
- 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%).
- 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.
“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 Natixis’ 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.”