Institutional Investsors Say Alternatives Can Add Safety

Date: Tuesday, September 25, 2012
Author: Christopher Condon, Bloomberg

Institutional investors say alternative investments such as real estate, commodities and private equity help protect them from volatility in traditional assets.

Almost a third of institutional investors globally said they can’t effectively manage risk because of unpredictable market volatility, according to a survey published today by Boston- and Paris-based Natixis Global Asset Management. Sixty- nine percent said it is essential to invest in alternatives to diversify investment risk.

“In their view, markets are driven more by economic and political events than by fundamentals,” John T. Hailer, chief executive officer of Natixis Global, said in a statement today. “As a result, decisions are often made for defensive reasons.”

Fund companies including Franklin Resources Inc. (BEN) and AllianceBernstein Holding LP (AB) have expanded alternative investment offerings as clients have turned away from traditional stock funds. Franklin agreed to pay about $183 million for a majority stake in K2 Advisors Holdings LLC, a fund-of-hedge-funds manager, the San Mateo, California-based company said in a Sept. 19 regulatory filing.

In the U.S., 22 percent of institutional investors said they can’t effectively manage risk because of volatility. The figure was 32 percent globally. Eight of 10 respondents worldwide said market volatility is “here to stay.”

“Until there’s job growth in the U.S., until there’s certainty in Europe, until we understand what all these regulatory reforms are going to mean, it all leads to uncertainty, which leads to volatility,” Hailer said in a telephone interview yesterday.

Natixis Global, owned by Paris-based bank Natixis SA (KN), had $711 billion in assets under management as of June 30. It holds stakes in 24 asset managers, according to the company’s website, including quantitative hedge-fund manager AlphaSimplex Group, Caspian Private Equity and real estate investment firm AEW Capital Management LP.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net