Investors are finding decisions around mandate design, asset allocation and new investment opportunities more challenging in the post-Goldilocks economic environment, according to the latest survey by Axa Investment Managers (Axa IM).
The survey assessed 97 institutional investors and consultants at a series of roundtables around Australia titled “Sensible mandate design in the aftermath of GFC”.
The after-effects of the “Goldilocks economy”, in which it is not so hot that it causes inflation and not so cold that it causes a recession, were creating market uncertainty, triggering institutional investors and consultants to take a more dynamic approach to their portfolios.
The survey found 20 per cent of respondents employed a purely dynamic asset allocation (DAA) approach.
About half, 53 per cent, employed both a DAA and strategic asset allocation (SAA) approach.
“Investors are facing new challenges that are moving them away from purely product-based approaches and are developing an appetite for more dynamic problem solving of their multiple objectives,” Axa IM Australia and New Zealand director Craig Hurt said.
“We wondered whether it would be possible to look at some lessons that we could apply so that the next crisis that we inevitably go through could be handled a little better.”
Under half of respondents, 49 per cent, said they had no intention of changing their equity weighting over the next 12 months, despite ongoing market volatility.
The remaining 31 per cent favoured a lower weighting, while 20 per cent said they would increase their equities.
In addition, investors are now realising the importance of thematic investing, rather than relying on benchmarks when making investment decisions.
Two-thirds of investors were taking a thematic approach to asset allocation, equities or both, the survey said.
“By applying a thematic approach at both an asset allocation and equity level, investors have a relatively sensible means of investing according to the knowns and preventing investments where there may potentially be problems,” Hurt said.
