Natixis Survey: Institutional Investors Prepare for a Market Shift as Volatility Returns

Feb 23 2018 | 12:48pm ET

A majority (78%) of institutional investors expected stock market volatility to spike in 2018, and they are making opportunistic allocations to alternative investments in order to help meet average long-term return assumptions of 7.2% this year, according to a survey released by Natixis Investment Managers today.

The survey also finds that institutions are stepping up efforts for increased deployment of Environmental, Social and Governance (ESG) strategies.

The global survey polled 500 institutional investors, including public and corporate pensions, foundations, insurance funds, endowments and sovereign wealth funds.

Key Highlights of the survey:

  • Alternatives serve many purposes: Institutions apply alternative investments to a wide range of portfolio objectives: Private Equity for alpha generation, Managed Futures for volatility mitigation, Infrastructure for stable income, Global Macro Strategies for diversification, and Commodities for inflation hedge.
  • ESG investing is taking on broader importance: 61% of institutional investors say their organization integrates ESG factors in its fundamental process, up from 52% in 2016. Their top reason for implementing these approaches is to proactively align investment strategy with organizational values. More than half (56%) believe ESG investing mitigates risks. 
  • An upward trend in outsourcing: During the next 12 months, 17% of institutions are considering outsourcing investment decision making, a rise from 13% in 2016 or 30% more. Their primary reason for doing so is to access specialist capabilities. 
  • Rising rates: Managing duration is institutions top strategy for navigating a rising rate environment.

Paris-based Natixis Investment Managers manages $997 billion in assets. It is a subsidiary of Natixis, the international corporate, investment, insurance and financial services arm of France’s Groupe BPCE.

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