Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013
Question marks

13886

Study questions how asset owners navigate quest for performance in low-yield environment

RELATED TOPICS​

Institutional investors show a continued appetite for alternative investments despite heightened concerns about return volatility, according to a new study.

“By the Numbers: The Quest for Performance,” was produced by the Center for Applied Research (CAR), State Street’s independent think tank, in partnership with the Fletcher School of Law and Diplomacy at Tufts University.
 
Using empirical analysis, supplemented by manager interviews and survey reviews, the study looks at the investment patterns of institutional investors across an extensive asset profile diversified by geography and a broad use of alternative assets and strategies.
 
CAR and Fletcher identified six critical factors driving innovation in meeting the dual challenges of more risk and less returns, including the persistence of low returns, higher return variability, converging correlations, the growing asset-liability gap, a real risk of tail events and illiquidity and the competitive pressure to mimic asset allocation strategies. The performance impacts of investor responses were then traced and distilled into five ways to achieve performance goals including becoming factor-curious, liability-sensitive, liquidity-selling, agency-aware and capacity-building.
 
“The search for performance remains elusive,” says Suzanne Duncan, global head of research at State Street’s Center for Applied Research. “As institutional investors’ creativity and patience continue to be tried, meeting performance challenges demands a disciplined core, innovative thinking and flexibility.”
 
Other findings of the research include:
 
· A globally diversified portfolio including alternatives generated 70 per cent enhanced performance net of fees with marginally higher volatility versus a more traditional portfolio composed of 60 per cent equities 40 per cent fixed income
 
· Among Organization for Economic Co-operation and Development (OECD) pension funds, the move to alternatives has been significant, rising from six per cent to 19 per cent of total assets under management from 2000 through 2012
 
· The differential between the best and worst performing private equity managers has increased more than 38 per cent from 13 per cent pre-crisis to 18 per cent post-crisis
 
“Not all alternatives are created equally, and neither are the investors who turn to them in the hunt for alpha,” says Kelly McKenna, global head of State Street's Center for Applied Research. “Today’s successful institutional manager will balance a desire for return with an appreciation for the complexity of portfolio risk as well as investment and liquidity constraints while respecting the rapid nature of market events that can implicate return objectives.”

Latest News

EFAMA has commented on today’s vote by the European Parliament in favour of a new..
Morgan Stanley Investment Management (MSIM) has announced the launch of the MS INVF Systematic Liquid..
Confidence in the continuing strength of bitcoin and Ethereum is driving wider interest in altcoins..

Related Articles

Juan Nozal, Mapfre Asset Management
Juan Nozal, Fixed Income Portfolio Manager at MAPFRE Asset Management, talks about the outlook for fixed income assets over 2024, in what he predicts will be an outstanding year for this asset class...
Juan Nozal, Fixed Income Portfolio Manager at MAPFRE Asset Management, talks about the outlook for fixed income assets over 2024,..
n response to the increased attention to climate change risk, institutional investors, asset managers, and asset owners in the US are committed to implementing a variety of measures to address climate change and reach their net-zero goals, according to Cerulli Associates...
n response to the increased attention to climate change risk, institutional investors, asset managers, and asset owners in the US..
Lord Hollick, House of Lords
A House of Lords committee has raised “significant concerns” over the role of UK regulators, their ability to operate with genuine independence from government and how they are held to account...
A House of Lords committee has raised “significant concerns” over the role of UK regulators, their ability to operate with..
Rob Edwards, Morningstar
The complexities of assessing performance from responsible investment strategies have been laid bare after Morningstar’s ESG indices delivered a mixed bag in 2023...
The complexities of assessing performance from responsible investment strategies have been laid bare after Morningstar’s ESG indices delivered a mixed..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by