North American fund buyers turn to alternatives to weather stormy markets – ValueWalk Premium
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North American fund buyers turn to alternatives to weather stormy markets

  • 67% of North American fund buyers are using alternative investments to manage risk
  • 86% say alternatives are becoming increasingly important for diversification
  • 69% say market volatility will increase over the next 12 months
  • 44% are predominantly looking to active funds to provide protection from volatility

Q4 2020 hedge fund letters, conferences and more

(London, January 2021) Two-thirds of North American fund buyers are using alternative investments to insulate portfolios amid fears of increasing volatility, new research shows.

A CoreData Research study of 200 professional fund buyers around the globe found six in 10 (57%) are currently using alternative investments to manage risk amid elevated levels of volatility and uncertainty. But this proportion increases to two-thirds (67%) of North American respondents.

The diversification benefits of alternatives are a key driver. Eight in 10 (79%) global fund selectors say alternatives are becoming increasingly important for diversification purposes — a view endorsed by nearly nine in 10 (86%) respondents in North America.

The survey, conducted in November and December 2020, also shows that fund buyers are gravitating toward active strategies to shelter from turbulent markets. Nearly half of global respondents (47% vs. 44% North America) are predominantly looking to active funds to provide protection from volatility.

Use of active funds and alternatives to provide downside protection comes as fund selectors brace for an uptick in volatility in 2021. Six in 10 (60%) global buyers expect market volatility to increase over the next 12 months. A higher proportion of respondents in North America (69%) anticipate elevated levels of volatility. The ongoing fallout from the pandemic is at the forefront of minds — global buyers point to increasing Covid-19 infections/new wave of lockdowns (23% vs. 25% North America) as their top concern for 2021. This is followed by asset bubbles such as a tech bubble (19% vs. 14% North America).

“With markets expected to remain choppy in 2021, fund buyers are looking to active strategies and alternatives to reduce volatility and manage risk,” said Andrew Inwood, founder and principal of CoreData. “We will likely see a continued shift to private markets and alternatives as investors seek out uncorrelated sources of return to diversify portfolios and generate alpha.”

While professional investors seek to insulate portfolios, they are also looking to capitalize on current market conditions. About two-thirds of global respondents (64% vs. 61% North America) are using tactical asset allocation strategies to exploit volatility and short-term market opportunities. A further two-thirds (64%) are hunting for opportunities in risk assets such as equities, emerging markets and commodities. This risk-on approach is particularly favored by respondents in North America (72%).

Elsewhere, half of global buyers (52% vs. 50% North America) are investing in value funds in the hope they will outperform when the economy recovers. And seven in 10 (70% vs. 69% North America) are allocating to sectors that have benefited from the pandemic such as tech, healthcare and e-commerce.

Key Findings

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How are you positioning your portfolios in the face of increased volatility and market uncertainty?

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About CoreData Research

CoreData Research is a global specialist financial services research and strategy consultancy. CoreData Research understands the boundaries of research are limitless and with a thirst for new research capabilities and driven by client demand; the group has expanded over the past few years into the Americas, Africa, Asia, and Europe.

CoreData Group has operations in Australia, the United Kingdom, the United States of America, Brazil, Singapore, South Africa and the Philippines. The group’s expansion means CoreData Research has the capabilities and expertise to conduct syndicated and bespoke research projects on six different continents, while still maintaining the high level of technical insight and professionalism our repeat clients demand.

With a primary focus on financial services CoreData Research provides clients with both bespoke and syndicated research services through a variety of data collection strategies and methodologies, along with consulting and research database hosting and outsourcing services.

CoreData Research provides both business-to-business and business to- consumer research, while the group’s offering includes market intelligence, guidance on strategic positioning, methods for developing new business, advice on operational marketing and other consulting services.

The team is a complimentary blend of experienced financial services, research, marketing and media professionals, who together combine their years of industry experience with primary research to bring perspective to existing market conditions and evolving trends.

CoreData Research has developed a number of syndicated benchmark proprietary indexes across a broad range of business areas within the financial services industry.

  • Experts in financial services research
  • Deep understanding of industry issues and business trends
  • In-house proprietary industry benchmark data
  • Industry leading research methodologies
  • Rolling benchmarks

The team understands the demand and service aspects of the financial services market. It is continuously in the market through a mixture of constant researching, polling and mystery shopping and provides in-depth research at low cost and rapid execution. The group builds a picture of a client’s market from hard data which allows them to make efficient decisions which will have the biggest impact for the least spend.


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