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Multi-asset strategies most favoured in current low-yield environment

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More than half of investors believe that Multi-Asset strategies, such as balanced and total return products, are the most favourable in terms of risk versus return, according to the findings of the latest Risk Rotation Index by NN Investment Partners, formerly ING Investment Management.

The survey revealed that 57 per cent of the panel of institutional investors favoured Multi-Asset, ahead of strategies such as Equities (55 per cent) and Hedge Funds (27 per cent).

Valentijn van Nieuwenhuijzen, Head of Strategy, Multi-Asset at NN Investment Partners, says: “In the current low-yield environment investors are increasingly looking to mitigate their risk while still aiming for attractive returns. It is therefore no surprise to see that they are turning to Multi-Asset strategies which provide diversity in return sources and adaptability that helps creating a safety net against losses.”

In a bid to replicate the benefits of Multi-Asset strategies, 44 per cent of investors say that they have increased the diversification of their portfolios over the past 12 months. The index also revealed that over the past year the majority of investors (64 per cent) have maintained their overall risk position, while 59 per cent state that they have maintained their exposure to risky assets. Notably, more than a quarter (27 per cent) of investors said that they had reduced the cash allocation in their portfolio, indicating a preference for more risk-friendly investment strategies.

During the past quarter overall risk appetite increased by 13.1 per cent, with 29.6 per cent of investors stating that their appetite had increased over the previous six months compared to 16.5 per cent who stated that their appetite had diminished. Equities are viewed as the most attractive asset class in the coming three months, being selected as the top choice amongst 61 per cent of respondents. It was followed by Real Estate (15 per cent) and Fixed Income spread products (8 per cent).

Van Nieuwenhuijzen concludes: “Given the dramatic fall in interest rates and strong capital market returns it is not surprising to see investors reducing their high levels of cash holdings. The opportunity costs of holding on to cash have been high in recent years and the need for higher returns remains high in many parts of the investor habitat. This drives potential rising appetite for higher return strategies, like Multi-Asset or Equities.

“It would appear that investors are slowly adjusting their portfolios from ‘risk off’ mode to ‘risk on’ and it will be interesting to see if this trend continues to gather momentum as we head towards Q3 2015.”

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