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Volatility prompts investors to diversify

Many investors plan to diversify their asset classes or increase exposure to alternative investments to deal with increased volatility in stock markets, research indicates.

Higher volatility – reflected in the largest-ever one-day spike in the CBOE Volatility Index, known as the VIX, on February 5 – has caused a change in equity market outlook among 164 investors surveyed.

More than half of respondents said they would diversify either by asset classes or strategies (28.6%), or with allocations to alternatives (23.2%).

Another 23% said they would increase cash exposure, and 8% planned to give more money to active managers.

The findings of the quarterly ‘BarclayHedge, MPI Volatility Angst Survey’ also reflected concerns about rising rates and increased geopolitical tension.

It also found that 60% of respondents supported the use of managed futures to diversify their investments amid market downturns and Sol Waksman, founder and president of BarclayHedge, said these investment were “among the best” to take advantage of market volatility as they allowed traders to profit from complex bets against market trends.

However, he said managed futures had failed to exploit February’s market turmoil.

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