Pressure to Perform: State Street Global Advisors Research Finds Contradictions in Investor Behavior on Balancing Reward with...
April 29 2015 - 7:30AM
Business Wire
Global Research Reveals Investors are Struggling to Reconcile
Objectives with the Pressures of the Market
State Street Global Advisors (SSGA) released global research
today that highlights significant contradictions in investor
behavior.
The pressure to perform is resulting in distinct investor
contradictions in three key areas: asset allocation, market
expectations, and downside risk protection strategies. The
research1 reveals:
- A continued push into equities with 63%
of global investors having increased their holdings of developed
market equities, and one in two investors (48%) having raised their
allocation to emerging market equities in the last six months
- However, a majority of the same sample
(60%) expect a negative equity market correction of between 10-20%
in both developed and emerging equity markets in the near term
- Furthermore, almost half (44%) believe
the market is overvalued and a correction is already overdue,
citing the slowdown in emerging markets and rising geopolitical
risk as principle reasons
- 65% of the survey respondents cite
funding pressures as the primary reason for increased allocation to
equities in the last six months. 53% of respondents also say they
would like to reduce allocations to equities, but do not feel that
there is a viable alternative given the low yields in other asset
classes
“Pressure to secure returns is driving a significant
contradiction in what investors believe and the actions that they
are taking. Sixty five percent cite funding pressure as a reason
for increased allocation to equities in the last six months, but
allocations are being made in spite of a strong belief that a
market correction is due or overdue,” said Daniel Farley, chief
investment officer for SSGA's Investment Solutions Group. “This
contradiction, along with the growing view that volatility is here
to stay, increases the need for adequate downside protection
strategies. As investors increase their exposure to riskier assets,
they should be thinking about how to remove unrewarded risk from
the table.”
The survey revealed that a lack of in-depth understanding of
downside protection strategies, combined with the negative
experiences investors had with traditional approaches during
previous market downturns, are leaving investors exposed to
potential market volatility.
- The trauma of the global financial
crisis is evident by the 84% of respondents that have deployed some
form of downside protection strategy, often dynamic asset
allocation
- However, despite the convergence of
correlations during the global financial crisis, many still place a
great deal of confidence in traditional diversification with 65%
believing that it alone is enough to protect their portfolios
- In general, there was a high degree of
possibly misplaced optimism with nine out of ten investors being
confident in their portfolio’s ability to weather a major market
correction
“Our survey shows that asset managers need to help investors
better understand their options when it comes to downside
protection, and work collaboratively with their clients to develop
solutions that offer the right levels of security,” continued
Farley.
The SSGA research, conducted in collaboration with an
independent research agency in January 2015, canvassed 420
investors, including CEOs, CIOs, portfolio managers and directors
across 13 countries, including Europe, Asia and the US.
For more information and to read the full research report,
please click here.
About State Street Global Advisors
For nearly four decades, State Street Global Advisors has been
committed to helping our clients, and the millions who rely on
them, achieve financial security. We partner with many of the
world’s largest, most sophisticated investors and financial
intermediaries to help them reach their goals through a rigorous,
research-driven investment process spanning both indexing and
active disciplines. With trillions* in assets, our scale and global
reach offer clients unrivaled access to markets, geographies and
asset classes, and allow us to deliver thoughtful insights and
innovative solutions.
State Street Global Advisors is the investment management arm of
State Street Corporation.
*Assets under management were $2.4 trillion as of March 31,
2015. This AUM includes assets (approximately $28 billion as of
March 31, 2015) for which State Street Global Markets, LLC, an
affiliate of State Street Global Advisors, serves as the marketing
agent.
Investing involves risk including the risk of loss of
principal.
The views expressed in this material are the views of the
individuals and are subject to change based on market and other
conditions. This document contains certain statements that may be
deemed forward-looking statements. Please note that any such
statements are not guarantees of any future performance and actual
results or developments may differ materially from those
projected.
CORP-1411
1 Conducted in collaboration with Longitude Research in January
2015
State Street CorporationBrendan Paul, +1
617-662-2903BPaul2@StateStreet.comorGodhuli Chatterjee,
+312-397-6013godhuli.chatterjee@ogilvy.com
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