A significant majority of investors believe markets are in for a prolonged period of turbulence, according to new research commissioned by Principal Global Investors.
The research, an independent study released by CREATE-Research, identifies investor appetite for a more dynamic approach to managing market volatility and asset allocation, with 78 per cent of survey respondents agreeing that markets were in an era of prolonged turbulence.
The survey involved 289 respondents, including asset managers, pension plans, pension consultants and fund distributors from 29 countries with combined assets under management of over US$25 trillion.
Commenting on the survey outcome, CREATE-Research chief executive Amin Rajan said the last four years had been the most volatile in the history of equity markets.
"Price fluctuations of 4 per cent or over in intra-day sessions have occurred six times more than they did on average in the previous 40 years," he said.
"Extreme spikes in market volatility and closer asset class correlations have been common."
Rajan said the headline findings of the survey suggested that the asset management industry faced significant challenges in converting the opportunity of persistent volatility into investment performance.
Principal Global Investors Australia chief executive Grant Forster said the report clearly signalled that the asset management industry had to take urgent and specific action if it was to capitalise on the inherent opportunity in volatility for clients.
"It's never been more important to partner with clients and provide customised solutions based on their changing needs and investment goals," he claimed.
"In Australia in particular, where there is more soul-searching about asset allocation than any other country, the report has shown that Asset Managers have been – and will be – enhancing their capabilities across a wide range of asset classes, after a clear acceptance of two facts:
- that the domestic equity market is now susceptible to the contagion effect of globalisation; and
- that new opportunity sets are vital if the managers are to maintain their relevance in a fast-changing pension landscape."
