Performance in markets, fears of Delta’s global economic impact, and concerns over inflation have investors and advisors watching markets closely for any signs of what many view as an inevitable correction. Markets in the U.S. have outperformed consistently for so long that there is increasing worry of impending volatility and significant correction looming on the horizon.
It’s a concern that has advisors diverting funds heavily into actively managed funds, reports Wealth Professionals.
“With the current cycle advancing very quickly, the risk that the correction is hard is growing,” Binky Chadha, chief strategist at Deutsche Bank, warned last week. “Equity valuations at the market level are historically extreme on almost any metric.”
A new poll by PGIM Investments, which is part of the $1.5 trillion global investment management firm Prudential Financial, Inc., found that advisors have funneled 62% of their client’s assets into active management and 34% into passive funds.
Fears of COVID resurgence with the Delta variant and the looming specter of another economic shutdown are having a huge impact on the way that advisors are approaching investing; 76% said that pandemic concerns guide their decisions, and 68% said that volatility within the stock markets is their primary concern for portfolio management.
“What we’ve found through both our research and our experience is that financial advisors continue to use a mix of both active and passive but rely more heavily on actively managed solutions within client portfolios,” said Stuart Parker, president and CEO of PGIM Investments. “The ability to generate alpha for clients, particularly during periods of market volatility, is critical.”
The study also found that while almost all financial advisors use mutual funds, 65% plan to use more ETFs in the next three years.
T. Rowe Price believes in the difference and benefits of active management. The firm currently offers five actively managed ETFs covering a variety of investment goals. The firm brings a bevy of experience and research to its products, with portfolio managers averaging over 20 years in investing each, as well as over 400 investment professionals dedicated to researching companies within ETFs.
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