Investors worried about increasing asset correlations

Institutional investors globally are concerned about high levels of correlation between traditional asset classes, according to a survey from Natixis Global Asset Management.

The survey found that 54% of investors agreed that equities and bonds are too highly correlated to give distinctive sources of return. Partly as a result, investors are putting more into alternative assets in order to find better risk-adjusted returns. Two-thirds of investors said that increasing allocations to non-correlated assets, such as private equity, private debt and hedge funds, is an effective way of reducing risk, while 49% said that investing in alternatives is essential to outperform broader markets. Natixis polled 660 institutional investors including corporates, public and government pension funds, sovereign wealth funds and endowments and foundations, with collective assets over $35 trillion.

Natixis Global Asset Management chief executive officer, John Hailer, said: “The events of the last month have shown the need for a sophisticated, balanced approach to asset allocation. That’s part of the reason institutional investors plan this year to supplement traditional stocks and bonds by making an even bigger commitment to non-correlated, alternative assets.”