Investor appetite for a more dynamic approach to managing volatility and asset allocation is up, according to a study by Create-Research.
The report - entitled Market volatility: friend or foe – suggests that the asset management industry faces significant challenges in converting the opportunity of persistent volatility into investment performance.
But 71% of asset managers in the study signalled that prolonged market turbulence offers great opportunity for active managers to deliver good returns. Conversely, only 13% believe that the industry can currently capitalise on this.
“The last four years have been the most volatile in the history of equity markets. Price fluctuations of 4% or over in intra-day sessions have occurred six times more than they did on average in the previous 40 years,” said Amin Rajan, chief executive officer of Create-Research and author of the report.
Rajan added: “Extreme spikes in market volatility and closer asset class correlations have been common. History shows that opportunity is inherent in periods of high risk and that high risk can reward active management.”
The report identified four key actions that respondents believe asset managers should take to overcome the challenge and prevent another lost decade of returns: develop multi-asset class capabilities (53%); ensure interests are more aligned with clients to share losses and gains (53%); encourage free thinking and high conviction investing (50%), and promote greater client engagement to minimise risk (66%).
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