According to research carried out by Create-Research – Market Volatility: Friend or Foe – following a commission from Principal Global Investors found that more than three-quarters (78%) of those surveyed expected markets to remain in a period of “prolonged turbulence”.
According to Amin Rajan, chief executive of Create-Research and author of the report, said that only slightly fewer (71%) thought that such prolonged market turbulence offers great opportunity for active managers to deliver good returns.
“Conversely,” he added, “only 13% believe that the industry can currently capitalise on this. The headline findings suggest that the asset management industry faces significant challenges in converting the opportunity of persistent volatility into investment performance.”
The survey received 289 individual responses from fund managers and distributors, pension providers and their consultants across 29 countries running a combined total of $25trn in assets under management. This was followed up with 100 interviews.
Rajan was also able to identify four key points that, if acted on by fund managers, will help them to work around the challenges that volatility otherwise offers:
- develop multi-asset class capabilities (53%);
- ensure interests are more aligned with clients (53%);
- encourage free thinking and high conviction investing (50%;
- promote greater client engagement to minimise risk (66%).
The report concludes that investors and fund managers see the opportunities thrown up in volatile markets but that fund managers are becoming more goal-oriented, managing risk rather than return.
In turn, investors are looking for a more dynamic asset allocation strategy, blending both risk on and risk off rather than it being a binary choice between the two.
