Context Summits, the leader in the one-on-one conference format for the alternative investment industry and Mercer, a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, announced the findings from the 2020 Context Allocator Trend Report. The survey, which was initially fielded in January during Context Summits Miami, and then again in May due to the COVID-19 pandemic, evaluated investment behaviors and trends as it relates to adoption and allocation to alternative investment strategies.
Read More: SIMON Markets LLC and Raymond James Launch New Strategic Partnership for Annuities
“As our survey results indicate, asset allocators hold increasingly diverging views on public markets due to the COVID-19 crisis, with many seeing opportunities in certain sectors such as e-commerce and transformational technologies, as well as emerging market and credit investments”
This year’s survey revealed that, despite market uncertainty, investor sentiment toward hedge funds shifted from January to May as those “very optimistic” toward hedge funds grew from 7% to 13%. Investors are, however, evolving their approach to evaluating managers, placing a greater emphasis on track record, which increased from 11% in January to 16% in May, and paying less attention to performance, which declined from 21% in January to 16% in May.
Read More: Strider Announces John Mullen, Former Assistant Director of CIA, Joins Company as Advisor
“It’s not surprising that allocators are managing through the pandemic and economic crisis by adjusting their investment allocations,” said John Culbertson, President and CIO of Context Capital Partners. “In a post-COVID-19 world, it is likely some trends, including virtual meetings and interactions will accelerate and could become permanent. But as long as long-term relationship building between managers and allocators remains relevant, face to face meetings and an intense due diligence process will remain an important part of go-forward allocations.”
Additional key survey findings include:
- Allocators Are Taking Action with Their Portfolios: 55% of allocators intend to adjust their portfolios, although there is nearly an even split on whether the changes are designed to add or mitigate risk.
- Allocations Happen Quickly: Allocators committed to making a change typically spend 50-100 hours conducting rigorous due diligence with 56% reporting that implementation of new allocations occur within 6 months or less from an initial introduction; 85% of new allocations occur within 12 months.
- ESG Factors Are Gaining Traction: Investor sentiment over the importance of ESG continues to shift slightly more positive as extreme negative sentiment decreased from 42% in 2019 to 34% in 2020 and extreme positive sentiment saw a slight uptick from 9% in 2019 to 12% in 2020. We expect this trend to continue as the investors push for clarity and metrics around the ESG framework.
- Market Downturn Worries Allocators the Most: Fears of a market downturn are most worrisome to investors in the wake of the COVID-19 pandemic, with this increasing from 27% in January to 31% in May. Reaching return goals is the second highest concern.
Read More: M Financial Group Licenses FAST Software to Enable New Digital Ecosystem for Member Firms
