A traditional portfolio construction is no longer adequate to protect against risk, a poll of advisers has found.
The traditional investor portfolio comprising 60% assets in equities and 40% in fixed income does not effectively mitigate risk in today's volatile economic environment, according to a poll of 178 UK-based advisers.
More than half of the participants (52%) said they felt that a traditional 60/40 portfolio was no longer the best way to pursue returns and manage investment risk for most investors. This compares with just 8% who still believe it is.
Nearly half of advisers (46%) said they felt there was a need to replace traditional diversification and portfolio construction techniques with new methods.
The research was conducted by Natixis Global Asset Management (NGAM).
This widespread lack of faith in traditional portfolio construction is arguably the result of an increased awareness of risk. Seven in ten advisers (71%) now say that most of their clients are conflicted between pursuing return and protecting capital.
The subject is one increasingly raised in client meetings according to the poll.
Two-thirds of advisers (66%) said that the majority of their clients have been more interested in discussing risk over the past year.
Four in five advisers (80%) say clients are concerned about a slowdown in global economic growth and a similar portion of respondents (78%) says investors are concerned about the European debt crisis.
Two of five respondents (40%) say that, because of market volatility, they now oversee assets their clients had previously held elsewhere; only 12% say they do not and 48% neither agreed nor disagreed.
Managing director global key accounts for Natixis Global Asset Management Ed Farrington explained that he felt in light of the shocks experienced by the market in recent years, risk assessment now needed to be the primary basis for asset allocation. "An adviser should be working hard to minimise the effects of market volatility on their client's money," he said.
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