The Natixis U.S. Investor Insights Survey found that almost 47% of investors worry about losing money due to market volatility, potentially limiting what they invest in the market. Yet a significant portion of investors – about four in 10 – are not interested in alternative products and strategies that could potentially diversify portfolio returns.
The survey also found 80% of investors believe the financial crisis is continuing to change the investment landscape, and 66% say they have changed their expectations about future investment returns.
While investors recognize the importance of understanding risk and diversification, few understand alternative investments, which can help stabilize a portfolio and diversify returns throughout periods of market turbulence, Natixis said.
Half (49%) of U.S. investors said they understood their portfolio’s risk “moderately” or “very well,” compared to a small percentage of investors (4%) who said they don’t understand it in detail.
Seven in 10 said they understood alternative investments “only a little” or “not well at all,” and only one in 25 said they understood them “very well.” More than half (53%) say they don’t understand how they work, and more than 40% even admit to having no idea of what alternatives are.
Even among high-net-worth investors, who compose the bulk of those eligible to invest in many alternative products, just 7% say they understand alternatives “very well,” and one in three (36.5%) say they don’t understand these instruments.
According to the Natixis survey, a majority of investors (63%) say they will invest only in products with which they are familiar, and two-thirds (69%) say they need to learn more about alternatives before investing in them. Nearly half (44.9%) said the greatest barrier to considering them for their portfolio is a lack of “enough information about them.” A significant number of investors are simply not willing to make any allocation to alternative investments, including more than a quarter of emerging high-net-worth investors (with $500,000 – $1 million in investable assets) and nearly a quarter (24%) of high-net-worth investors.
The Natixis Global Asset Management U.S. Investor Insights Survey was conducted by CoreData Research and surveyed 463 American adults. Two surveys were conducted, in May and July 2011.