Geopolitical risks are top concern of fund managers: Survey

The unsettled nature of politics around the world, including uncertainties in the United States, could keep fund managers awake at night this year, according to a new poll.

It found that geopolitical risks are the top concern for 2018, followed by more interest rate hikes.

The survey of 55 firms last December also noted unease over the state of politics in the US.

The findings reflect a different set of challenges from those usually cited, said Mr Nicholas Hadow, chairman of the Investment Management Association of Singapore, which did the survey.

"The more everyday economic concerns have given way to worries about the state of global politics - the rise of populism, income inequality and even war," he noted.

"It is no surprise, given the broad uncertainty, that we are now seeing more interest in multi-asset strategies from investors seeking diversification in their portfolios."

The top three strategies expected to grow in popularity this year are multi-asset, which was cited by 53 per cent of respondents, ESG-focused (39 per cent) and absolute return (35 per cent).

Multi-asset involves investing in a variety of products, including alternative investments. It has raised vast sums over the past two to three years as it is often focused on generating income.

ESG funds screen for environmental, social, governance factors in the investment process. This discipline is driven by client demand, particularly among institutions, and is seen as an effective risk management strategy.

Half of respondents cited margin compression due to increasing competition as the biggest threat to growth over the next 12 months, followed by the risk of disruption due to new fintech (39 per cent).

Fund managers believe rising business and compliance costs, the emergence of new distribution channels and technologies, and increasing regulatory obligations could have a major impact over the next 12 months.

More than 57 per cent cite the rise of fintech in fund distribution channels as the top growth driver over the next three years.

This is followed by improving performance and assets under management (46 per cent) and demand for lower-cost products (44 per cent).

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A version of this article appeared in the print edition of The Sunday Times on February 04, 2018, with the headline Geopolitical risks are top concern of fund managers: Survey. Subscribe