Risk Management Remains Top of Mind as Advisors Pursue Strategic Mix of Products By Invesco
Registered Investment Advisers (RIAs) expect to see increased usage of Exchange-Traded Funds (ETFs) in client portfolios, while aversion to risk remains high, according to results of an Invesco market research study released today.
RIAs surveyed believe ETFs will make up 24 percent of portfolio allocations over the next 12 months and 33 percent over the next three years, representing a 10 percent increase over results reported in Invesco’s survey of RIAs in 2011.
Against a lingering backdrop of global economic uncertainty, RIAs still see clients remaining vigilant in their aversion to risk as 91 percent believe their clients are more interested in minimizing losses than maximizing gains.
“This year’s study continues to show how RIAs are embracing the value of ETFs and the many ways they can be implemented in their clients’ portfolios,” said Bobby Brooks, National Sales Director for Invesco PowerShares. “But even as the equity markets have enjoyed a strong run year-to-date, RIAs are still indicating that risk management is a primary focus and they are looking to a variety of products, including alternative assets, to manage risk.”
With such issues as portfolio allocation and risk management in mind, Invesco partnered with Cogent Research to conduct its second blinded study to learn what’s top of mind for RIAs and their clients given current market conditions.
Among other key findings in the Invesco study:
RIAs continue to blend active and passive funds in a single portfolio Forty percent of RIAs agree that now more than ever they are creating client portfolios using a blend of active investment vehicles and passive ETFs. Less than a quarter of RIAs utilize an exclusively all active management portfolio (24 percent) or an all ETF/passive management portfolio (19 percent).
Risk management remains a priority Consistent with the 2011 survey, RIAs cite managing risk as a predominant philosophy in managing client assets (40 percent). The survey showed wealth preservation as the most important issue for clients, followed by mitigating risk.
Risk management investment strategies have not changed RIAs continue to mitigate risk in client portfolios by creating a blended asset allocation of active investments and passively managed ETFs (62 percent) and applying a more conservative asset allocation (56 percent).
Alternatives, emerging market equities and large-cap funds drawing more attention Within actively managed mutual funds, RIAs are most likely to increase capital over the next 12 months in alternatives (46 percent), emerging market equities (43 percent) and U.S. large-cap funds (40 percent).
About the Invesco RIA Market Research Study The RIA Market Research Study was conducted for Invesco by Cogent Research in late August and early September 2012. The study is based on a survey of RIAs around the country with an average of $478 million in investable client assets. Cogent Research is not affiliated with nor employed by Invesco.
To address concerns RIAs have regarding risk management, the Invesco RIA Division launched nationwide “Risk Institute” seminars earlier this year. These meetings provide RIAs risk education, risk-aware implementation ideas and programs to help them effectively speak with clients about risk topics.