Nearly two-thirds of U.S. professional investors believe actively managed strategies work best in falling markets, according to results from the MFS Active Management Sentiment study released on Monday.
And, as MFS points out, the evidence supports their conviction.
Over the past 25 years, the top quartile of active managers has added 7.6% in excess returns in falling markets, according to MFS.
Part of the study, which includes insights from 1,083 financial advisors, institutional investors and professional buyers around the globe, focuses specifically on 575 respondents in the United States.
Of those U.S. respondents, 63% expect an increase in market volatility over the next 12 months
Joe Flaherty, chief investment risk officer at MFS Investment Management, sees this as an opportunity for active managers.
“At some point, we will see additional volatility and that creates opportunity for active managers to identify risks and generate alpha,” said Joe Flaherty, chief investment risk officer at MFS Investment Management, in a statement. “Downside risk management is part of the value proposition that active managers can deliver through research and security selection. Many active global managers have significantly outperformed in falling markets.”
Whether market volatility over the past month is temporary or a sign of things to come, MFS finds that 70% of professional U.S. investors surveyed call protecting capital in down markets one of the most important attributes when considering an active manager.
The survey asked investors to recognize what makes a good active manager.
The professional investors in MFS’s survey identified what they consider to be the most important attributes of a skilled active manager: risk management, long-term conviction and research expertise.