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Three in 10 (31%) say their institutions monitor a risk budget daily to keep overall portfolio risk in check; 53% do so on a regular basis (weekly or monthly) and 13% do so occasionally (quarterly or annually). Forty-one percent say their institutions make it a practice every day to consider the volatility of an asset or security before considering its potential return; 42% do so on a regular basis (weekly or monthly) and 15% do so occasionally (quarterly or annually). The majority (64%) of U.S. institutional investors say traditional diversification and portfolio construction techniques need to be replaced. Seven in 10 (72%) say conventional 60/40 portfolios no longer are the best way to pursue returns. Approximately two-thirds believe “increasing allocations to non-correlated assets” (64%) and “increasing the use of liquid alternatives” (68%) are effective strategies for managing portfolio risk. Seven in 10 (72%) say the best way to temper market volatility is to increase allocations to non-correlated assets. A majority (82%) of respondents find it difficult to mitigate the impact of market volatility; 76% report they have had difficulty protecting the portfolios they oversee from dramatic swings in value. Approximately eight in 10 (83%) U.S. institutional investors claim it is difficult to meet their total return objectives. More than three in four (78%) say it is difficult to manage tail risk. Nine in 10 (89%) of those surveyed believe volatility creates investment opportunities and 83% say market volatility is here to stay. However, nearly all (97%) institutional investors in the U.S. say their organization does an average or above-average job in constructing portfolios that protect principal and achieve growth; and 91% say their institutions have average or above-average capabilities in constructing portfolios that can generate positive returns regardless of market conditions. Seven in 10 (68%) U.S. institutional investors cite a contagion resulting from Europe’s debt crisis as one of the three most likely sources of market volatility in the next two years. Nearly half (47%) say Europe’s financial woes are one of the top three issues keeping them awake at night, followed by regulatory uncertainty (30%) and discovering unexpected sources of risk in their portfolios (29%).
Three in 10 (31%) say their institutions monitor a risk budget daily to keep overall portfolio risk in check; 53% do so on a regular basis (weekly or monthly) and 13% do so occasionally (quarterly or annually). Forty-one percent say their institutions make it a practice every day to consider the volatility of an asset or security before considering its potential return; 42% do so on a regular basis (weekly or monthly) and 15% do so occasionally (quarterly or annually).
The majority (64%) of U.S. institutional investors say traditional diversification and portfolio construction techniques need to be replaced. Seven in 10 (72%) say conventional 60/40 portfolios no longer are the best way to pursue returns. Approximately two-thirds believe “increasing allocations to non-correlated assets” (64%) and “increasing the use of liquid alternatives” (68%) are effective strategies for managing portfolio risk. Seven in 10 (72%) say the best way to temper market volatility is to increase allocations to non-correlated assets.
A majority (82%) of respondents find it difficult to mitigate the impact of market volatility; 76% report they have had difficulty protecting the portfolios they oversee from dramatic swings in value. Approximately eight in 10 (83%) U.S. institutional investors claim it is difficult to meet their total return objectives. More than three in four (78%) say it is difficult to manage tail risk.
Nine in 10 (89%) of those surveyed believe volatility creates investment opportunities and 83% say market volatility is here to stay. However, nearly all (97%) institutional investors in the U.S. say their organization does an average or above-average job in constructing portfolios that protect principal and achieve growth; and 91% say their institutions have average or above-average capabilities in constructing portfolios that can generate positive returns regardless of market conditions.