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Alternative Market Briefing

Global fund buyers anticipated volatility increase, ESG and private assets on the rise

Tuesday, April 07, 2020

Laxman Pai, Opalesque Asia:

Professional fund buyers globally anticipated increased market volatility in 2020, taking a more defensive approach to portfolio positioning, said a survey.

The survey by Natixis Investment Managers revealed that four-fifths (79 percent) of surveyed fund buyers expected greater equity volatility and 72 percent expected higher volatility in the bond markets.

While nobody could have predicted the historic levels of volatility experienced in markets across the globe since February 2020, fund buyers had already signaled they would be taking a risk-averse approach to funding selection during 2020.

The survey of more than 400 fund buyers - responsible for selecting funds included on the private bank, insurance, fund-of-funds and other retail platforms - which was conducted in Q4 2019, said that almost half (44%) expected to diversify away from US equities, while 73% said they would be willing to underperform their peers in exchange for greater downside protection.

Whether it was concern about stratospheric stock valuations, questions about the viability of a sustained low-interest rate environment, or the lingering effects of geopolitical uncertainty, professional fund buyers expected the rally was unlikely to continue in 2020, it said.

Fund buyers are looking to active managers to help navigate the greater sector dispersion in markets, with three-quarters of fund buyers (75%) willing to pay higher fees for potential outperformance.

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