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 Business Wire 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 returns (90%). *A vast majority (88%) say meeting their total return objectives will be difficult. *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 difficult. “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 retirement won’t 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 domestic stocks. “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 risk. 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 infrastructure (30%). 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. Methodology 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. 672471 Contact: NATIXIS GLOBAL ASSET MANAGEMENT BOSTON David Snowden, 617-449-2507 firstname.lastname@example.org
Institutional Investors Are Confident About Risk Management Despite Anticipating Challenges – Market Swings, Inflation and
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