Institutional investors have not had things much easier in the marketplace than their individual investor counterparts. And they’re leading the trend toward alternative investments, saying alternatives are the only way to spread the portfolio risk in today’s markets.
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Institutional investors have resigned themselves to the fact that market volatility is the new normal. Nine out of ten money managers say the volatility increases opportunity.
But 76% reported in a recent study that they had difficulty protecting their portfolios from large market swings.
Most have ratcheted up their risk management strategies and 64% say traditional approaches to asset management are outdated. Seventy-two percent no longer believe in the 60/40 asset allocation rule.
The study had 482 global participants. It included 151 US managers with a median asset level of $30 billion. One third of the institutional investor respondents to the Nataxis Global Asset Management study said that risk in the marketplace is not as high as it was five years ago during the financial crisis.
But almost all said that risk management
had become more of a focus over the last five years. They are increasing use of non-correlated assets as well as liquid alternative strategies.
Many high net worth investors got caught holding illiquid investments during the crisis when their asset values tumbled and cash dried up. Even for institutional investors, portfolio risk management should be broad-based and well-integrated, based on investment objectives.