Global institutional investors are more confident they can handle risk, but key issues are still concerning, according to a report released Monday by Natixis Global Asset Management.
The survey of 500 senior decision makers in 19 countries found rising volatility, inflation and low yields are still major worries.
Three-quarters of respondents said severe market swings were challenging, and 64% said rising inflation was a big concern. However, the top challenge was lower yields and weak returns, cited by 90% of respondents.
In the United States, 85% of respondents said they were confident about their approach to risk management and 88% said traditional strategies for asset allocation and portfolio construction were no longer ideal.
“Institutional investors and some individuals are looking at the traditional 60/40 portfolio as incomplete,” David Giunta, president and CEO of Natixis, told AdvisorOne on Friday. “They’re adding things like alternatives, which aren’t correlated to the markets the way traditional asset classes are, to take down risk and target similar returns.”
Giunta said that “it’s comforting to see people focus on risk management.” Traditionally, “Most investors start out with what kind of return they wanted. We’re looking at what kind of risk you want,” he added. “More people are looking at the risk side and starting with that.”
Globally, two-thirds of respondents said they were confident in their risk management approach and 60% agreed traditional strategies were not as effective as they used to be. Consequently, 88% said it would be difficult to meet their total return objectives.