Investors Worried About Reaching Retirement Goals, but Paralyzed by Fear of Losses in Volatile Markets

In rising markets, three in five still holding their current levels of cash investments, according to Natixis Global Asset Management study

BOSTON--(BUSINESS WIRE)--Four in five (83%) U.S. investors worry they won’t be able to meet their retirement income goals, and 77% are concerned about outliving their assets in retirement. While they know they need more assets, 53% say their fear of losing money due to market volatility limits what they invest, and 58% say they will take on only minimal investment risk, even if it means sacrificing returns. These are among the findings of a new study of 702 individual investors commissioned by the Durable Portfolio Construction Research Center of Natixis Global Asset Management, the world’s 13^th largest asset manager.¹

“They would like to try new ways of investing, but they would also like to sleep at night. There are strategies that can help investors manage risk and create a durable portfolio, but investors don’t yet know enough about them.”

Investor fear is driven by the past decade’s market volatility:

• Seven in ten investors say that volatility has eroded their confidence in the markets (71%) and reduced their expectations for future investment returns (70%).
• Eight in ten investors are worried about a wide range of other economic and policy issues, including consumer confidence (89%), higher taxes on investment (88%) and earned (85%) income, the European debt crisis (87%) and political uncertainty due to this year’s elections (85%).
• Just 28% say they are “highly confident” in their portfolios’ ability to manage volatility, and 53% agree that stability in volatile times is their top investing priority.
• 57% say they are not reducing the cash investments in their portfolios.

“Individual investors are concerned about achieving their long-term financial goals. They recognize that they need to grow their savings, but they are paralyzed by fear and uncertain about how best to generate returns or protect principal in today’s volatile markets,” said John T. Hailer, chief executive officer of Natixis Global Asset Management in the Americas and Asia. “They would like to try new ways of investing, but they would also like to sleep at night. There are strategies that can help investors manage risk and create a durable portfolio, but investors don’t yet know enough about them.”

Investors are willing to re-evaluate traditional asset allocations

Investors are willing to look to new asset allocation and diversification strategies to address their fears. Nearly seven in ten investors (69%) agree that it is time to replace traditional techniques with new approaches. Three-quarters (75%) say the traditional portfolio allocation with 60% in stocks and 40% in bonds is no longer the best way to pursue returns and manage risk.

Many investors already are prepared to look at new ways to build portfolios. Four in five (85%) say it is important to have different types of investments in their portfolios, including 54% who say it is “very” important. In fact, nearly half (46%) say they regularly consider whether an investment will generate returns that are uncorrelated to the markets.

“Building a durable portfolio is not only about capital allocation; it’s also about risk allocation. Investors need to start by looking at potential risks embedded in their existing equity and fixed income investments, and then consider strategies such as alternative investments – including hedging strategies, commodities, currencies and managed futures – to control volatility while still having the ability to achieve their goals for returns,” said Hailer.

Financial advisors can provide needed guidance to investors

Although more than half of investors (52%) say they are interested in investment products that are unrelated to the performance of the broader markets, only two in five (39%) currently invest in alternative investments.

The biggest barrier to participation in alternative investments is a lack of knowledge. Nearly seven in ten (68%) investors say they invest only in products they understand, and 48% say they have little or no understanding of alternative investments. Nearly two-thirds (64%) say they need to learn more about alternatives before they would consider investing in them.

Financial advisors are best-positioned to help investors become comfortable with alternative investments and other new strategies. Half of investors (51%) said they would consider alternative investments for their portfolios if their advisors recommended them. However, only 35% of investors say they have discussed alternatives with their advisors.

Investors are increasingly willing to engage their advisors, with 62% agreeing that they are more interested in discussing risk with their advisors than ever before and 59% saying that they are revealing their expectations to their financial advisors more than before.

“Market volatility is likely here to stay, and investors need portfolios that can help them achieve their goals whether markets are moving up or down. Financial advisors have an important role to play in educating their clients about how to build durable portfolios that can smoothly navigate this risk and volatility, perform in both up and down markets and help investors achieve their goals for retirement,” Hailer said.

For more information from the Durable Portfolio Construction Research Center, see durableportfolios.com.

Methodology

The online quantitative survey of 702 individual investors was conducted in May and June by CoreData Research. The U.S. study was part of a wider survey of 5,319 individual investors in 14 countries in Asia, Europe, South America and the Middle East, as well as Australia, South Africa and the U.K. A copy of the global survey highlights is available at ngam.natixis.com/pressroom.

About Natixis Global Asset Management, S.A.

Natixis Global Asset Management, S.A. is one of the 15 largest asset managers in the world based on assets under management.¹ Its affiliated asset management companies provide investment products that seek to enhance and protect the wealth and retirement assets of both institutional and individual investor clients. Its proprietary distribution network helps package and deliver its affiliates’ products around the world. Natixis Global Asset Management, S.A. brings together the expertise of multiple specialized investment managers based in Europe, the United States and Asia to offer a wide spectrum of equity, fixed-income and alternative investment strategies.

Headquartered in Paris and Boston, Natixis Global Asset Management, S.A. has assets under management totaling $711 billion (€560 billion) as of June 30, 2012.² Natixis Global Asset Management, S.A. is part of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Global Asset Management, S.A.’s affiliated investment management firms and distribution and service groups include: Absolute Asia Asset Management; AEW Capital Management; AEW Europe; AlphaSimplex Group; Aurora Investment Management; Capital Growth Management; Caspian Private Equity; Darius Capital Partners; Gateway Investment Advisers; H2O Asset Management; Hansberger Global Investors; Harris Associates; IDFC Asset Management Company; Loomis, Sayles & Company; Natixis Asset Management; Natixis Multimanager; Ossiam; Reich & Tang Asset Management; Snyder Capital Management; and Vaughan Nelson Investment Management.

¹ Cerulli Quantitative Update: Global Markets 2012 ranked Natixis Global Asset Management, S.A. as the 13th largest asset manager in the world based on assets under management as of December 31, 2011.
² Assets under management (AUM) may include assets for which non-regulatory AUM services are provided. Non-regulatory AUM includes assets which do not fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part 1.

Diversification through the use of alternative investment strategies may result in a profit or loss and can underperform during periods of strong market performance. Investing in alternative investments can involve heightened risks which include leveraging, short-selling, volatility of returns, and other speculative investment practices.

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