Against that backdrop, 85% of those surveyed said they expect market volatility to increase over the coming year, with diversification (84%) and downside protection or capital preservation (83%) rising to the top of the agenda. Nearly half of all respondents (47%) said they are actively broadening geographic exposure beyond the US.
Active management conviction holds firm
Despite the turbulent environment, investor confidence in active management remains strong. Eighty-five percent said they believe active strategies can help them meet their investment objectives over the next 12 to 18 months, with key reasons including the potential for outperformance, the ability to navigate uncertainty with greater agility, and the management of concentration risk in equity markets. More than a third (38%) said they are specifically raising their active allocations to reduce index concentration exposure.
Johanna Kyrklund, group chief investment officer at Schroders, said: “In an increasingly volatile world, investors are reshaping portfolios to put diversification and resilience front and centre, while also juggling geopolitical risk. It is telling that in these circumstances, an overwhelming 85% of investors expressed confidence that active managers can help achieve those objectives in the next 12 to 18 months.
“In recent years we have moved from a globalised world prone to deflationary shocks to a geopolitically fragmented world, where restructuring of supply-chains can contribute to inflationary shocks. The ability to be selective, manage risk and respond dynamically to fast-moving market conditions is our active edge to navigating these choppier waters.”
Active ETFs are also gaining traction within this trend. Investors highlighted diversification (49%), satellite or tactical positioning (42%) and risk management (33%) as the main reasons for incorporating them. Lower costs compared with active mutual funds were cited by 70% as the primary draw, alongside intraday liquidity and trading flexibility (51%). Small and mid-cap equities (37%), emerging market equities (35%) and thematic or sector strategies (34%) were identified as the areas where active expertise adds most value within an ETF structure.
