RIASs expect to see increased use of exchange-traded funds (ETFs) in client portfolios, while aversion to risk remains high, according to a market research study by Invesco.
Advisers surveyed believe ETFs will make up 24% of portfolio allocations over the next 12 months and 33% over the next three years, a 10% increase over results from Invesco’s 2011 survey of RIAs.
Against a lingering backdrop of global economic uncertainty, RIAs see clients remaining vigilant in their aversion to risk, as 91% believe their clients are more interested in minimizing losses than maximizing gains.
“This year’s study continues to show how RIAs are embracing the value of ETFs and the many ways they can be implemented in their clients’ portfolios,” said Bobby Brooks, national sales director for Invesco PowerShares. “But even as the equity markets have enjoyed a strong run year to date, RIAs are still indicating that risk management is a primary focus and they are looking to a variety of products, including alternative assets, to manage risk.”
Other key findings in the Invesco study:
RIAs continue to blend active and passive funds in a single portfolio. Forty percent of RIAs agree that now more than ever they are creating client portfolios using a blend of active investment vehicles and passive ETFs. Less than a quarter of RIAs (24%) utilize an exclusively all active management portfolio or an all ETF/passive management portfolio (19%).
Risk management remains a priority. Consistent with the 2011 survey, 40% of RIAs cite managing risk as a predominant philosophy in managing client assets. The survey showed wealth preservation as the most important issue for clients, followed by mitigating risk.
Risk management investment strategies remain unchanged.RIAs continue to mitigate risk in client portfolios by creating a blended asset allocation of active investments and passively managed ETFs (62%) and applying a more conservative asset allocation (56%).
Alternatives, emerging market equities and large-cap funds are drawing more attention. Within actively managed mutual funds, RIAs are most likely to increase capital over the next 12 months in alternatives (46%), emerging market equities (43%) and U.S. large-cap funds (40%).
The RIA Market Research Study was conducted for Invesco by Cogent Research in late August and early September. The study is based on a survey of RIAs around the country with an average of $478 million in investable client assets.
Invesco Ltd. is an independent global investment management firm.