Institutional investors expect looming financial environment will favour active management

Written by Adam Cadle

04/12/2019

Institutional investors including insurance companies expect a global financial crisis to hit in the next five years and believe this environment will favour active management.

Three quarters of institutional investors favour active management and 71% think individual investors have a false sense of security about passive investments and are unaware of their risks.

With volatility rising and rates challenging about half of institutions (46%) believe dispersion will also be up. The resulting increased spread between security prices, is maybe one reason why institutional investors say today’s markets favour active management.

Sixty-four per cent of institutions report they implement some form of ESG in their portfolios. This represents a nearly 10% increase over 2017 when 40% did not implement ESG.

More often than not, institutions are investing for the upside potential with more than half (54%) of institutions saying there is alpha to be found in ESG. Nearly the same as the number who say they invest in ESG to align their assets to organisational values (57%). Almost four in ten (37%) implement ESG as a way of minimising headline risk.

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