Executives from investment firms are predicting continued market volatility in 2017, which will lead asset owners to reallocate capital to specialized active strategies and demand even more from their money managers.
“We're going to see volatility in the markets continue to increase for several reasons,” said Mitchell Harris, CEO of BNY Mellon Investment Management, New York. Those reasons include “the uncertainty factor” of President-elect Donald Trump and a significant number of geopolitical events, such as Brexit and the upcoming elections in France and Germany.
Kevin Jestice, principal and head of institutional investor services at Malvern, Pa.-based Vanguard Group Inc., said in a phone interview that the three dominant trends affecting institutional money managers in 2017 will revolve around skill, conviction and cost.
With continued fee pressure, dispersion and market volatility, Mr. Jestice argues that active managers will need to prove their worth to clients early and often. “There's an increasing skepticism among institutional investors,” he said. “There's an increased scrutiny on the skill of investment managers they're hiring.”
Rick Lacaille, executive vice president and global chief investment officer at State Street Global Advisors in Boston, shared the sentiment that managers need to prove their worth now more than ever in a separate interview. “It's all about value for money: "What am I getting and what am I paying for?'”