Global economic uncertainty leads to greater investment in active management
PMarket performance, fears of Delta’s global economic impact, and concerns about inflation are leading investors and advisers to watch the markets closely for any signs of what many see as an inevitable correction. US markets have consistently outperformed for so long that there are growing fears of impending volatility and a significant correction is on the horizon.
It’s a concern that causes advisers to divert funds overwhelmingly to actively managed funds, Wealth Professionals reports.
“With the current cycle moving very quickly, the risk that the correction will be hard increases,” Binky Chadha, chief strategist at Deutsche Bank, warned last week. “Market-level equity valuations are historically extreme on almost every measure. “
New survey from PGIM Investments, part of the $ 1.5 trillion global investment management firm Prudential Financial, Inc., found advisers funneled 62% of their clients’ assets in active management and 34% in passive funds.
Fears of a COVID resurgence with the Delta variant and the looming specter of another economic shutdown have a huge impact on how advisers approach investing; 76% said pandemic concerns guide their decisions, and 68% said stock market volatility is their top concern for portfolio management.
“What we have discovered through our research and experience is that financial advisors continue to use a mix of assets and liabilities, but rely more on actively managed solutions within the portfolios of clients, ”said Stuart Parker, President and CEO of PGIM Investments. . “The ability to generate alpha for clients, especially during times of market volatility, is critical.”
The study also found that while almost all financial advisors use mutual funds, 65% plan to use more ETFs in the next three years.
T. Rowe Price believes in the difference and the benefits of active management. The company currently offers five actively managed ETFs covering a variety of investment objectives. The company brings a wealth of experience and research to its products, with portfolio managers averaging over 20 years of investment each, as well as more than 400 investment professionals dedicated to researching companies within ETFs.
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