Investors still have appetite for risk despite macro events

Storm cloudsIn the wake of Greece’s debt woes and China’s Shanghai Composite Index losing 30% of its value in three weeks from mid-June, you’d assume investors may be wary of taking risks. Not so say NN Investment Partners (formerly ING Investment Management).

Findings from the firm’s latest Risk Rotation Index has shown that investors remain open to risk despite some severe volatility in the market. It found that overall risk appetite is up by 10% for the third consecutive quarter.

 Over the last six months, 28% of investors have increased their risk appetite, compared to just 18% who have seen their appetite decrease. The firm surveyed a panel of global institutional fund managers for the research.

However, in spite of this confidence, investors still have growing concerns over a potential Eurozone crisis, with 49% of respondents citing it as a ‘significant’ threat to their portfolios – up from 35% in the previous quarter – while one in eight (13%) view it as a ‘very significant’ threat.

Away from the Eurozone, other potential dangers such as a black swan event (24%) and a Chinese slowdown (21%) were also named by investors as events of which they were wary.

Ways in which investors are dealing with market volatility include a growing preference for using multi-asset (74%) and equity strategies (56%). These strategies are more favoured amongst investors than illiquid assets such as private equity and mortgages (26%), hedge funds (22%) and high dividend (18%).

In terms of preferred asset classes for handling risk vs return in the coming three months, investors prefer equities (34%), followed by real estate (17%) and government bonds (14%).

“Our survey reveals that 46% of investors have diversified their portfolios to manage risk over the past year, and we believe that multi-asset strategies such as balanced or total return funds provide investors with the exposure to risk that provide them with a steady yield stream – even in an uncertain economic landscape,” says Valentijn van Nieuwenhuijzen, head of strategy, multi-asset at NN Investment Partners.

©2015 funds europe