European investors looking to raise absolute return allocation
GLOBAL - Almost 90% of European investors are looking to increase their allocation to absolute return strategies over the next three years, according to a survey by Aviva Investors.
The absolute return areas of the greatest interest to European investors are global macro (67%), volatility trading (67%), long/short equity (60%) and market neutral (53%).
Around half of respondents to Aviva's survey said clearer industry-defined classifications and more transparent communication about funds' investment strategies would help them to make more informed asset allocation decisions.
When asked about what they looked for when choosing an absolute return manager, investors unanimously agreed that the risk management framework within the strategy was the most important factor.
In addition, 80% said they preferred a fund manager that had experience in using alternative investment techniques, while 67% also look for a track record of outperformance in the strategies.
Paul Moody, global client investment director at Aviva Investors, said: "The fluctuating market environment over the last few years, coupled with extremely low returns on cash investments, has meant European investors started looking for returns regardless of market conditions.
"But post credit crisis, investors are extremely careful when taking asset allocation decisions. They want to know what could happen if an extreme event occurs, and, hence, asset managers' risk management processes play a major role.
"This does not necessarily mean investors are being risk averse - rather that they expect their managers to help them assess the risk they are taking."
The survey also revealed more than 70% of the investors think UCITS funds might gain an even greater share of the absolute return sector, agreeing that their liquidity and transparency is an advantage to investors.
A further 67% also said the regulatory comfort and reassurance of the UCITS badge made them more attractive products.
The survey, which included European institutional investors from Germany, Switzerland, France, Italy, Spain, Belgium, Norway, Ireland and Denmark, with almost €280bn in assets under management, was conducted at the Aviva Investors Absolute Returns conference in London last month.