Risk management strategies need to be adjusted

Investors face lower returns and higher volatility. However, the current RiskMonitor survey from Allianz Global Investors shows: Investors have not changed their risk management since the financial crisis.

In the first quarter of the year, Allianz Global Investors has pursued its yearly RiskMonitor survey among 755 institutional investors in 23 countries. Those see the higher volatility (42% of participants), low interest rates (24%) and the uncertain monetary policy (16%) as the biggest challenges. The investors expect that share market risks, interest rate risks, performance risks and currency risks have the biggest effect on future portfolio returns.

Despite, the investment strategy is not becoming more defensive and institutional investors maintain their risk appetite. US and European shares remain the most purchased asset class with 29 and 28 percent. The aim is thereby to maximise risk-adjusted returns.

To achieve this goal, a higher diversification across asset classes (58%), geographical areas (56%) and duration management (54%) are used. Thereby, the same measures that were already commonly used in the financial crisis have become even more popular - despite 62 percent stating that those tools are not a protection against massive price declines.

Two thirds of respondents are searching for new strategies to balance risks and returns and improve the protection against drawbacks. 47 percent say that they are willing to pay more for such a risk management and 54 percent have already put aside money to develop their risk management accordingly. “Asset manager need to develop innovative solutions and products that help customers to defy low returns while not being exposed to excessive volatility,” says Neil Dwane, Global Strategist at AllianzGI.