Committing long term to traditional investment styles is bad for one's investment health, the world's largest fund allocators have told a global survey of their ranks published by Natixis Global Asset Management.
Committing long term to traditional investment styles is bad for one’s investment health, the world’s largest fund allocators have told a global survey of their ranks published by Natixis Global Asset Management.
At the same time as this sea change in thinking has occurred, 482 institutions around the globe have told Natixis that to a great extent they now accept and use, and are satisfied with, alternative strategies.
The findings from the survey, conducted in June/July, are good news for alternative fund managers still suffering some reputational bruises from 2007/2008, and arguably a wake-up call for managers resting their future on long-only benchmarked products.
Terry Mellish, head of UK institutional business and both global and UK consultant relationships for the distribution arm Natixis Global Associates, says: “Investors and advisers in the UK think portfolio construction techniques needed to be updated, and new approaches to investment objectives need to be constructed.
“Alternatives approaches are now mainstream and here to stay, and the debate about the ‘role of alternatives’ is essentially over. Many investors felt that in the current environment with continued volatility and illiquidity across many markets, a traditional approach to portfolio construction in the guise of equities and bonds and real estate was not necessarily appropriate, and a long-only strategy of equities and bonds would not give the best risk-adjusted outcome.”
Fabrice Chemouny, executive vice president, head of international strategic and marketing group, Natixis Global Asset Management – international distribution, adds: “The desire to replace traditional portfolio construction techniques is there and investors are looking for different approaches, but some lands like Germany and Switzerland may be more advanced in this.”
He adds many mainstream asset classes had revealed themselves as too highly correlated during the crises.
Mellish says he expects the significant reappraisal by allocators will not be ephemeral, nor be forgotten come the next bull market. “People have long memories, and they will not forget the environment they have come through, and better risk management and risk budgets will be critical to help people think about portfolio construction for the long term.”