Institutional investors around the world are looking to alternatives strategies to play a growing role in managing the impact of market volatility on their portfolios and taking advantage of the opportunities that volatility creates, according to a survey by Natixis Global Asset Management.
The June-July survey of 482 institutional investors in Asia, Europe, the Middle East, the U.S. and the U.K., with a median asset level of $23 billion, found that 91% saw increasing allocations to non-correlated assets — including hedge funds, private equity and venture capital — as a key to managing portfolio risk, with 89% favoring liquid alternatives such as global macro or long/short equity strategies.
The survey also showed a loss of faith in traditional diversification and portfolio construction techniques. For example, close to 60% of respondents said that for portfolios built predominantly around traditional asset classes, “historical data demonstrating that longer holding periods decreases the likelihood of a negative annualized return are no longer valid.”
In an interview, Robert M. Hussey, executive vice president-institutional services with Natixis Global Asset Management — U.S. Distribution, said expectations that the market volatility of recent years will persist have clearly undermined confidence in strategies focused on buying and holding traditional asset classes.
That doesn't necessarily translate into more tactical portfolio management strategies, said Mr. Hussey, who noted that “buy and hold” may prove suitable for portfolios more focused on alternative strategies.