Advisors favor active management to navigate unsettled marketsA new PGIM Investments survey of more than 500 financial advisors reflects a reliance on both active and passive strategies. Read the full report, Seeking the Active Advantage in Uncertain Times here ene
September 07, 2021 — NEWARK, N.J.–(BUSINESS WIRE)–With choppy markets reflecting both optimism and uncertainty about an unfolding recovery, financial advisors are relying heavily on actively managed strategies to navigate the road ahead, according to a new PGIM Investments survey of more than 500 financial advisors. PGIM Investments is part of PGIM, the $1.5 trillion global investment management business of Prudential Financial, Inc. (NYSE: PRU).
The survey found that advisors allocate a substantial percentage of client assets to active management (62%), while also leaving room for passive strategies (34%). They anticipate this allocation will remain largely the same over the next three years. Advisors also shared the following beliefs about active 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.”
Advisors prefer active management to meet most investment objectives
PGIM’s survey also found that advisors prefer active management to meet most investment objectives, including:
- Accessing emerging market opportunities.
- Protecting against market declines.
- Providing risk-adjusted returns.
- Generating reliable income.
- Managing tax liability was the only instance where advisors showed a slight preference for passive management.
How advisors are positioning client portfolios for a pandemic and beyond
Given the pandemic’s devastating impact on global economies and markets, it’s not surprising that most advisors (76%) say COVID-19 is influencing how they construct client portfolios in 2021. Approximately two-thirds (68%) indicate stock market volatility is their top portfolio management concern. Additional findings include:
Investment Vehicles: While nearly all financial advisors (98%) currently use and will likely continue to use mutual funds, over the next three years 65% anticipate using more exchange-traded funds (ETFs) and 41% anticipate greater use of separately managed accounts.
Asset Allocation: As expected, advisors use a mix of asset classes across client portfolios, including U.S., international, and emerging market equities; fixed income and alternative strategies. In the next three years, advisors anticipate increasing equity allocations in international/global and emerging markets.
Search for Yield: Within fixed income, advisors see high-yield bonds, investment- grade corporate bonds, and emerging market debt as the top three opportunities for generating yield in 2021.
Environmental, Social, Governance (ESG): Two-thirds (66%) of advisors say their average client is at least somewhat familiar with ESG investing, and over half (54%) anticipate increasing allocations to ESG strategies in the next three years.
Read the full report, Seeking the Active Advantage in Uncertain Times, for detailed research findings.