Natixis Global Asset Management, the French investment bank, has released the findings of its latest survey of 500 of the top decision makers at institutional investment firms around the world, and the results suggest numerous things to watch out for in the coming year. The survey showed that these investors continue to closely monitor political and economic events taking place all around the world and anticipate higher levels of market volatility in 2017. The impact of this shift is likely to be a turn toward active management and alternative asset areas for those investors, in the hopes that they will be able to successfully control their risk and find opportunities for higher returns. (See also: Is Active Management Making a Comeback?)

Number One Concern: Volatility

Natixis' survey results suggest that the top concern among institutional investors around the world is global market volatility. Roughly two thirds of those surveyed indicated that geopolitical events were likely to continue to cause volatility to spike. Just under 40 percent suggested the outcome of the U.S. presidential election would do the same, and 37 percent pointed to the likelihood of changes in interest rate levels as being a predictor of volatility.

In a Volatile Market, Investors Turn to Active Strategies

In response to anticipated volatility, the investors Natixis surveyed suggested they would be likely to turn toward more active management strategies. Many of those surveyed suggested that passive investment strategies could cause market distortions, and nearly 75 percent of responders indicated that the current environment would likely be favorable to active approaches. Beyond that, nearly four out of five surveyed said they would be willing to accept a higher fee for the potential of outperforming the markets, and two out of three indicated their preference for active management for its favorable risk-adjusted returns over passive strategies. (See also: How to Use Active and Passive Investing for Retirement)

Long Term Plans Suggest Shifts Toward Active Approach, Too

Institutions surveyed for the Natixis report also suggested that they would be likely to incorporate active management strategies more over the longer term as well. On average, 67 percent of the assets of those investors interviewed are actively managed, and the 33 percent of assets that are passively managed will likely only increase by 1 percent over the coming three years. This is a marked shift downward from the Natixis survey of 2015, in which institutional investors anticipated that 43% of their assets would be in passive investment areas over the subsequent three years. It seems that passive strategies, which 88% of those surveyed say are beneficial for their role in managing fees, are likely to not outweigh the rapid shifts going on in economies around the world thanks to major, disruptive political and economic events. Institutions indicated their predictions that the top-performing investments of the next year would likely be emerging markets, private equity, and high yield bonds.

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