Institutional investors worldwide are “steeling” for the possible emergence of asset bubbles and market corrections, research has found.
In the UK, almost two-thirds of institutional investors expect asset bubbles to negatively impact performance in 2018 and about three-quarters feel the current market environment favours active management.
The opinions from UK institutions were drawn from a Natixis Investment Managers survey of opinion formers at 500 institutions globally with $19 trillion of assets.
Allocations to passive have reduced for three years in a row, according to the research, and some investors are concerned passive has distorted market prices, posing a systemic risk.
Oliver Bilal, head of international sales and marketing at Natixis IM, said: “Institutional investors around the globe are wary of fragile market conditions, distorted asset prices and systemic risks caused by central bank interventions and the growing popularity of passive investments, and they continue to turn to active management to manage current market conditions.”
Institutions have also warned retail investors of the risks.
“They [institutional investors] are confident their own portfolios are built to weather future market conditions, but warn that individual investors are not aware of the systemic market risks posed by passive investing,” said Bilal.
The research also found that investors are increasing allocations to non-traditional assets, including private equity, private debt, infrastructure and real estate, as they seek alternatives to bonds and hunt for higher returns in a crowded market, Natixis said.
©2017 funds europe