Diversification and a more holistic approach to portfolio management have become increasingly crucial as market volatility has surged, according to Schroder’s Global Investor Insights Survey.
The research surveyed more than 1,000 institutional investors, wealth managers and intermediaries and found 85% expected greater market volatility in the next year. As such, respondents were building more resilience into their portfolios with a greater emphasis on diversification (84%) and downside protection (83%).
The survey was conducted from April to May 2026, when the war in Iran was at its peak, with around 69% identifying conflict in the Middle East as the chief concern. Energy price shocks and further geopolitical escalation were also identified as major concerns for 53% and 52% of investors, respectively.
See also: Markets surge after US-Iran deal struck but damage not undone yet
In total, some 50% of respondents said they were concerned about a global slowdown or recession.
Similarly, uncertainty around US foreign policy and global leadership was a problem for 67% of intermediaries. As a result, just under half of investors said they planned to increase their allocations outside the US.
Other priorities for allocators included capital growth, income and sustainability outcomes.
Johanna Kyrklund, group chief investment officer at Schroders, said: “In an increasingly volatile world, investors are reshaping portfolios to put diversification and resilience front and centre, while also juggling geopolitical risk.
“In recent years we have moved from a globalised world prone to deflationary shocks to a geopolitically fragmented world, where restructuring of supply-chains can contribute to inflationary shocks.”
This boosted faith in active managers, with 85% of respondents expressing confidence active fund managers could help them achieve their aims and 38% raising their allocations.
This was also reflected in active ETF’s becoming more prominent, with almost half of investors seeing them as driving diversification.
“The ability to be selective, manage risk and respond dynamically to fast-moving market conditions is our active edge to navigating these choppier waters,” Kyrklund said.
See also: Calastone: Investors drop equities as bond funds experience best month in three years
Meanwhile, respondents were also becoming more holistic in their approaches, according to the report.
For example, half of investors said they were now assessing public and private equity opportunities together instead of separately. For example, investors pursuing long-term growth found opportunities in small and mid-cap strategies (65% of respondents) as well as small to mid-cap private equities (59%).
Respondents also emphasised diversification in credit. In public markets, 61% of respondents identified high-yield and emerging market debt as great sources of alpha, while 55% saw investment-grade corporates as delivering reliable real income.
This more holistic approach was also visible across asset classes, with investors looking for risk-adjusted income turning to equity income, government bonds, corporate bonds and even securitised credit, indicating income had gone beyond bonds for respondents.
Kyrklund added: “Diversification across regions, asset classes, investment styles and wrappers is becoming increasingly important in managing risk and building resilient portfolios.”
