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Advisors split between maintaining global investing approach and adjusting to uncertainty and client demands
In the latest FPO survey, 40 percent of advisors said they have altered their approach to investing in the global markets over the past five years. Of those, more than one-third (34 percent) have decreased global exposure. Many of these respondents pointed to a relative preference for U.S. equities, general uncertainty about the global markets and client demands to avoid exposure to
Overall, 68 percent of advisors surveyed said they are optimistic about the capital markets over the next three years. Yet, likely reflecting concerns about
“The issues in
Many advisors surveyed said they are either keeping global allocations at policy weights or only making slight adjustments. However, 48 percent indicated that they are making decreases from portfolio policies around global equity investing for their clients with relatively short time horizons. Nearly a third (30 percent) of advisors reported doing so for clients with relatively long time horizons.
“It may be prudent to reduce risk exposure for investors with short time horizons, for whom downside risk far outweighs the benefit of potential upside. But advisors need to remember that investors can be easily tempted to disregard disciplined investment strategies in favor of short-term peace of mind,” said Smith. “With current concerns around
No common language around global investing
In addition to differing opinions on global investment strategies, there appears to be little consensus among financial advisors around simply defining global investing. In the survey, 39 percent of participants said they believe an investment strategy with global equity exposure is “one that is not constrained by geography in its stock selection.” Another 34 percent defined global investing as “a strategy that invests in companies whose revenues are generated both inside and outside the United States” and 25 percent selected “a strategy that invests in companies domiciled both inside and outside the United States.”
“In the absence of an industry-wide definition of a global investing approach, it is crucial that advisors are deliberate and clear about their own perspective on the topic and that they ensure clients are on the same page. Doing so can provide a great starting point for a larger discussion around the role of global investing in a diversified portfolio,” said Smith.
Advisors turn to global equity active mutual funds for global exposure
Despite concerns, many advisors remain committed to global investing. To gain global equity exposure in clients’ portfolios, advisors are using global equity active mutual funds (66 percent), followed by global equity allocations within a diversified fund (48 percent) as well as global equity exchange-traded funds (ETFs) (32 percent). Global equity index-tracking mutual funds (12 percent) and country-specific mutual funds (11 percent) were among the least popular options selected.
“Advisors recognize the benefits of active management when it comes to global investing. With intelligent active management, advisors and their clients can benefit from the expertise of professional money managers with global perspective and the ability to seek potential opportunities for outperformance,” said Smith. “The bottom line is that most of the economic activity and growth in the world today is occurring outside the U.S. and globalization is making a company’s country of domicile less meaningful2. We believe many investors would be well served by working with their advisors to discuss their long-term investment strategies in light of the opportunities presented by a global investing approach.”
More about Russell’s Financial Professional Outlook
The current iteration of the FPO includes responses from more than 300 financial advisors working in 105 national, regional and independent advisory firms nationwide. The survey was fielded between
More information about the FPO survey, including a video and a full report of findings, can be found at: www.russell.com/Helping-Advisors/YourBusiness/FinancialProfessionalOutlook.asp.
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2 Source: IMF World Economic Outlook Database,
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Source: Russell Investments
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