Active management will be key to investment outperformance in 2024, report most wealth managers in a new Natixis Investment Managers survey.
According to the findings, released today, seven in 10 firms say active fund management will be essential to investment outperformance throughout the year as active funds outpace their benchmarks. Fifty-eight percent of firms say that actively managed funds outperformed last year, and 65% expect the funds to continue doing well.
More managers are already moving into active management: 72% say their firms now offer semi-transparent exchange-traded funds (ETFs), with 90% or more planning to maintain or add more actively managed ETFs. Another 71% offer direct indexing options to investors, and 84% will also either maintain or increase access to these strategies. Forty-three of fund selectors express interest in adding active strategies to their platforms.
While passive investments have previously outpaced active funds, 45% of fund managers attribute its success to Federal Reserve policy, or after years of low interest rates and little to no inflation, Natixis finds. Should a recession happen in 2024, 61% fear the market downturn would hinder passive investment performance.
Furthermore, 49% of fund selectors believe investors are relying too much on passive investments like index funds.
Half of fund selectors cite cost efficiency as the main benefit in offering active exchange-traded funds, while 52% believe the biggest benefit is tax efficiency. Other benefits include the convenience of access innovative strategies (45%), intraday trading (41%), and enhanced alpha potential (25%).
Model portfolios, SMAs ‘front and center’
Natixis’ findings also show a preference among firms with model portfolios and separately managed accounts (SMAs). Seventy-four percent of respondents credit model portfolios for making investors more confident during volatile markets, 69% say it helps keep clients invested during periods of volatility, and 61% believe it helps advisors build stronger relationships with clients.
Most fund selectors (84%) say they have their own model offering and 65% offer models developed by in-house investment teams, yet 41% are adding more third-party models to their platform in 2024.
Managers are also specifically looking to incorporate specialty models with three strategies: high-net-worth models with advanced customization capabilities (49%), tax-managed (42%) and thematic models focused on market trends like longevity, climate change, and disruptive technologies (36%), according to Natixis.
On the SMA front, 77% currently offer clients access to these investments, and 35% plan to expand their SMA offering over the next two years.
The survey from Natixis includes 198 U.S. fund selectors, representing private banks, wirehouses, registered investment advisors (RIAs) and RIA aggregators, independent or individual wealth managers, and other investment advisory firms that collectively manage $19.4 trillion in client assets.
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