Market volatility means investors have needed to make some quick decisions about asset allocations and portfolio construction, but how aware are they of risk?
A new report from State Street Global Advisors has discovered how investors are managing risk, navigating uncertainty, and adapting to macroeconomic and market shifts.
Slightly more than half of investors (55%) who took part said that, in the weeks immediately before President Trump announced the tariffs that sparked a strong exodus from equities, they felt informed about the risk to their portfolios.
Most investors were also concerned about tariffs and trade wars over the next 12-18 months, with self-directed investors most worried (47%) followed by advised (44%), and hybrid (37%). Inflation remained a concern too to a lesser extent (33% of self-directed and 35% of advised and hybrid).
“As the market absorbs tariff impacts and ongoing uncertainty, questions around risk, diversification, and access to liquid, flexible investment tools are front and center,” said Anna Paglia, chief business officer at State Street Global Advisors. “Our research addresses key questions about portfolio resilience.”
Amid market volatility, ETFs are seen as key elements of a portfolio, especially among those with investable assets of $250K or more where 65% of respondents cited the funds as important to help boost overall performance. More than six in ten believe ETFs make them better investors.
Asked about mitigating risk, around half said they avoid high-risk investments and/or diversify their portfolios, while a third hold cash or cash equivalents.
For advisors, the use of alternatives and cash are clear hedging strategies. Half of advisors allocate to alternative investments/strategies to manage portfolio risk with 79% intending to increase this over the next year or so. Almost half said they are increasing allocations to cash/cash alternatives.
Advisors cite reducing exposure to public markets and finding alternative sources of returns as the top reasons for using alts.
Alternatives are becoming less alternative though as the traditional 60/40 portfolio mix loses favor.
SSGA’s ETF Impact Report predicts that the ETF market will take in $2 trillion in 2025 with gold ETFs seeing AUM rise to $500 billion by 2026, and active ETFs reaching $700 billion by the end of 2026.
Other predictions are that:
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