- Active management and alternatives gain weight in the face of concern for fixed income.
- In equities, it can be seen that professional managers are more willing to take risks than financial advisers, since, while the former have increased variable income, the latter seem to receive flows in their conservative profiles.
- In conservative portfolios there is a duality in management style: a “Barbell” strategy, which overlaps risk and defensive assets simultaneously, and, on the other hand, a “Delegation” strategy of management, which overlies multi-assets and return absolute.
- In the case of absolute return funds, there is a tendency to look for more conservative assets and strategies that are uncorrelated with traditional markets and with lower volatility.
The concern for fixed income has become widespread and, to the caution in the face of government debt and high yield, corporate credit, emerging debt, peripheral debt and flexible funds have joined. According to the last Barometer of Spanish careers of Natixis IM, conservative portfolios respond to the problem of fixed income with two opposite management styles: delegation vs. management.
On the other hand, in equity it is appreciated that professional managers are more willing to take risks than financial advisors, since, while the former have increased variable income, the latter seem to receive flows in their conservative profiles. In the alternatives, the most demanded strategies continue to be those with a lower correlation with traditional assets and with lower volatility, such as long-term equity short-term, market neutral short-term, global macro fixed-income or multialternative. The already traditional concern of investors for duration, emerging and high yield, has been extended practically to the entire spectrum and the strategies that until now were the option that hoarded flows, global flexible funds, They have begun to see their inflows decline due to their global credit bias. In this way, the categories in which more has been invested are the most defensive, that is, the short and very short terms.
Juan José González de Paz, senior consultant in the Dynamic Solutions team at Natixis Investment Managers , has indicated that “investors are beginning to be worried about credit spreads as well as duration, in other markets such as the United States, where the cycle of types is more advanced, the same thing happens and the short and very short terms are prioritized, although there they offer a greater yield at maturity In Europe, where the short terms offer a much more limited profitability, their raison d’etre is to protect against impact of a rise in interest rates, “he says.
In the case of equities, the managers have decided to increase exposure to the stock market. However, advisors seem to be somewhat more cautious and flows from aggressive profiles to moderates and conservatives. “The advisors want to reduce the risk profile of their portfolios in the face of increased volatility since the beginning of 2018,” explains González de Paz.
In response to this market environment, conservative portfolios show a duality in management style. On the one hand, a “barbell” strategy, which overweights risk and defensive assets simultaneously, that is, short-term fixed income and monetary and monetary. And, on the other hand, a strategy of “delegation” of management, which overlaps multi-assets and absolute return.
In the case of absolute return funds, there is a tendency to look for more conservative assets and strategies that are uncorrelated with traditional markets and with lower volatility, such as market-neutral debt and equity strategies, long-term equity short-term stocks, multialternatives and the global macro of fixed income. On the contrary, the exposure to long short credit strategies has been reduced and the reason may also be its corporate credit bias, which the managers seem to be reducing.
According to Almudena Mendaza, sales director for Ibera of Natixis IM, “Active management and personalized advice are the key to finding profitability in an environment where it is increasingly difficult to enjoy attractive returns. In that sense, it seems that the alternative assets begin to gain more prominence in the portfolios to deal with the volatility of the markets. These strategies are uncorrelated with the traditional asset classes, so they are also able to offer profitability regardless of the market environment and without having to necessarily raise the level of risk. Each investor must analyze in their own portfolio what type of assets they need to add, which is why it is so important to receive advice that fits the investor’s profile and objectives. “