Confidence in active management remains “strong” – but with many investors concerned about a drop in equity markets over the next year, actives are under pressure to show they can protect capital, research shows.
Just over 70% of assets of the 845 investors surveyed globally were in active strategies, research sponsored by MFS Investment Management showed, and in the UK where the active versus passive debate is strong, seven out of ten investment professionals said there were confident in actives.
However, there is “muted” confidence in achieving an average annual return of 6.6% over the next three years, the figure that most investment professionals expected. The survey showed that one in three were “not confident”.
In manager selection, investors gave an 80% importance to a manager’s ability to protect capital as markets fall – though strong risk management and consistent performance over the longer term were more important, scoring 84% and 86%.
MFS Investment Management sees the results as offering support for active management at a time when it is under intense attack from critics and as passive products win more market share.
Madeleine Forrester, managing director of UK institutional business at MFS, said: “In recent years we have seen flows into passive accelerate, but professional investors are still showing strong support for active strategies.
“Investors are continuing to allocate to active management today and results clearly show the role it will play in future as markets will likely become more volatile in the years ahead.”
Fifty of the respondents were from the UK and almost two-thirds of those said they looked at performance track records of five years or more when hiring external managers – yet 70% also said they would look to replace managers after just three years of underperformance.
©2016 funds europe
