Institutional Investors Are Confident About Risk Management Despite
Anticipating Challenges – Market Swings, Inflation and Weaker Returns
Most say traditional investing principles have outlived their usefulness
BOSTON -- June 10, 2013
Institutional investors around the globe say they have a better handle on
risk, but most worry about the challenges of rising volatility, inflation and
low yields, according to a study by Natixis Global Asset Management (NGAM),
which oversees more than $785 billion worldwide. Many institutional investors
are exploring new investment strategies and currently favor global and
emerging market stocks, as well as real estate and private equity.
“While markets have seen positive growth and less volatility, institutional
investors still anticipate potential risks as a major challenge,” said John T.
Hailer, chief executive officer of Natixis Global Asset Management in the
Americas and Asia. “They’re confident, but at the same time acknowledge that
they need to manage risk more effectively.”
Among the study’s key findings:
*Two-thirds (65%) are confident in their risk management approach,
including 85% in the United States.
*However, many institutional investors anticipate being challenged by
severe market swings (75%), rising inflation (64%) and lower yields/weaker
*A vast majority (88%) say meeting their total return objectives will be
*Six in 10 (60%) investors globally – and 88% in the U.S. – agree that
traditional asset allocation and portfolio construction techniques are not
ideal for today’s markets.
*Most (89%) institutions believe they’ll meet their future obligations, but
70% globally and 81% in the U.S. say individuals saving for retirement
will fall short.
*Well over half of institutional investors (58%) plan to add to their
global equity holdings in 2013, followed by emerging market stocks (46%).
*More than 70% say setting strategic asset allocation and taking tactical
advantage of market movements is challenging.
*Most (60%) plan to increase their allocations to alternatives, and believe
they will perform better in 2013 than they did last year.
The results, released today by NGAM’s Durable Portfolio Construction Center,
include insights from more than 500 institutional investors that collectively
manage more than $11.5 trillion in assets.
Most say traditional investing principles have outlived their usefulness
Five years after the financial crisis upended markets, many institutional
investors say the old rules of investing no longer apply in today’s markets.
In the U.S., institutional investors (88%) feel strongly that traditional
portfolio construction and diversification strategies aren’t ideal for most
investors, and 60% of global institutions agree. Additionally, more than 70%,
including a high concentration of sovereign wealth funds, say that setting
asset allocation and taking tactical advantage of market movements is
“The old road map no longer guides investors, and the new one is being drawn
every day,” said Hailer. “They need more tactical help with portfolio
construction and asset allocation so they can build stronger, more durable
portfolios that can better withstand the cycles.”
Majority: We’ll meet our future obligations, but individuals saving for
While 89% of institutional investors are confident in their ability to meet
their own future obligations, that confidence does not extend to individuals
saving for retirement. A large majority of institutions (81%) in the U.S. say
the average citizen won’t have enough assets in retirement, and seven in 10
(70%) globally say the same – a powerful message considering that many
respondents manage retirement assets professionally. Institutional Investors
expressed greater concern in Latin America (88%) and the United Kingdom (84%).
Optimism for stocks across the board, particularly global equities
The widespread attraction to equities continues, with investors particularly
drawn to global stocks. Asked to project which asset class will perform best
this year, the top choice was global equities (27%), followed by domestic
stocks (19%) and emerging market equities (15%).
This optimism is reflected in most investors’ allocation plans for 2013, as
58% plan to increase their exposure to global stocks, 46% will add to their
emerging market equity holdings and 42% will increase their weighting in
“Institutions are mindful that they need to meet both short- and long-term
objectives, and they see stocks – particularly those beyond their own borders
– as the best way to achieve that balance,” Hailer said.
Lower yields have made the risk-reward tradeoff of bonds less appealing for
many investors, as 43% say they plan to scale back on their domestic bond
exposure in 2013 and 42% will reduce their global bond allocations. U.S.
investors are slightly more optimistic within their own borders, with only 29%
saying they will reduce their domestic bond allocations. Investors worldwide
are bearish on gold and cash, as more than 80% anticipate lowering or
maintaining their current allocations to each.
Most believe alternatives are essential to managing risk, and are adjusting
their portfolios accordingly
Institutional investors have an above-average comfort level with alternative
assets such as hedge funds, real estate, private equity and commodities. A
large majority (85%) report that they own alternatives, and three in four say
it is essential to invest in these strategies in order to diversify portfolio
Most (60%) plan to add to their alternative investments, or other assets that
don’t correlate with the broader market, in the next 12 months, with the most
popular target areas being real estate (41%), private equity (36%) and
Most are also bullish on the near-term performance prospects for alternatives,
with 71% predicting that the assets they own will perform better in 2013 than
they did last year. Institutional investors in the U.S. are more cautious,
with less than half (48%) projecting better year-over-year performance.
NGAM’s 2013 institutional research study is based on fieldwork conducted in 19
countries throughout the Americas, Europe, Asia and the Middle East. Telephone
interviews were conducted in January and February with more than 500 senior
decision makers from private pension plans (189), public pension plans (109),
sovereign wealth funds (43), insurance companies (35), endowments/foundations
(18), fund of fund companies (11) and asset consultants (97). See full report
for additional details.
About Natixis Global Asset Management, S.A.
Natixis Global Asset Management, S.A. is one of the 15 largest asset managers
in the world based on assets under management.^1 Its affiliated asset
management companies provide investment products that seek to enhance and
protect the wealth and retirement assets of both institutional and individual
investor clients. Its proprietary distribution network helps package and
deliver its affiliates’ products around the world. Natixis Global Asset
Management, S.A. brings together the expertise of multiple specialized
investment managers based in Europe, the United States and Asia to offer a
wide spectrum of equity, fixed-income and alternative investment strategies.
Headquartered in Paris and Boston, Natixis Global Asset Management, S.A.’s
assets under management totaled $785 billion (€613 billion) as of March 31,
2013.^2 Natixis Global Asset Management, S.A. is part of Natixis. Listed on
the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest
banking group in France. Natixis Global Asset Management, S.A.’s affiliated
investment management firms and distribution and service groups include:
Absolute Asia Asset Management; AEW Capital Management; AEW Europe;
AlphaSimplex Group; Aurora Investment Management; Capital Growth Management;
Caspian Private Equity; Darius Capital Partners; Gateway Investment Advisers;
H2O Asset Management; Hansberger Global Investors; Harris Associates; IDFC
Asset Management Company; Loomis, Sayles & Company; McDonnell Investment
Management; Natixis Asset Management; Ossiam; Reich & Tang Asset Management;
Snyder Capital Management; Vaughan Nelson Investment Management and Vega
Investment Managers. Visit www.ngam.natixis.com for more information.
The information contained herein is provided solely for information only and
does not constitute a solicitation to buy or an offer to sell any financial
products or services. This document may contain references to third party
copyrights, indexes, and trademarks, each of which is the property of its
respective owner. Such owner is not affiliated with Natixis Global Asset
Management or any of its related or affiliated companies (collectively “NGAM”)
and does not sponsor, endorse or participate in the provision of any NGAM
services, funds or other financial products.
^1 Cerulli Quantitative Update: Global Markets 2012 ranked Natixis Global
Asset Management, S.A. as the 13th largest asset manager in the world based on
assets under management as of December 31, 2011.
^2 Assets under management (AUM) may include assets for which non-regulatory
AUM services are provided. Non-regulatory AUM includes assets which do not
fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part 1
NGAM Distribution L.P. is located at 399 Boylston Street, Boston, MA 02116.
Natixis Global Asset Management consists of Natixis Global Asset Management,
S.A., NGAM Distribution, L.P., NGAM Advisors, L.P., NGAM, S.A., and NGAM,
S.A.’s business development units across the globe, each of which is an
affiliate of Natixis Global Asset Management, S.A. The affiliated investment
managers and distribution companies are each an affiliate of Natixis Global
Asset Management, S.A.
NATIXIS GLOBAL ASSET MANAGEMENT
David Snowden, 617-449-2507
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