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September 28, 2017 at 10:58 AM
Investors need better education about index funds and alternative investments, according to a Natixis survey.
Natixis surveyed 750 individual investors across the United States with a minimum of $100,000 in investable assets. The group included 223 millennials (age 21 to 36); 251 Generation Xers (age 37 to 52); and 236 baby boomers (age 53 to 72), as well as 85 retirees.
The online survey was conducted in February 2017 and is part of a larger global study of 8,300 investors in 22 countries and regions from Asia, Europe, the Americas and the Middle East.
“Through our research, investors tell us loud and clear they want a better connection to their investments, they’re confused about passive investing, and they want transparency and value for their money,” David Giunta, CEO for the U.S. and Canada at Natixis Global Asset Management, said in a statement.
According to Natixis, some of the blame for this investor confusion can be traced to closet indexers. Natixis defines “closet indexers” as firms that claim to actively manage their funds and charge commensurate fees but deliver portfolios that mimic benchmarks.
According to the survey, 64% of investors say they expect their mutual funds to have portfolios that differ substantially from their benchmarks, but 71% believe many active managers charge high fees while really just tracking an index.
The survey also found continued misperceptions about index investments.
According to the survey, 66% think index funds are less risky and 61% say they help to minimize losses — even though, as Natixis points out, index funds track both the ups and the downs of the markets they follow and provide no built-in risk management.
In addition, only 72% of investors agreed that index funds give them returns comparable to the market — the definition of index funds — which suggests investors would benefit from additional education.
