Against the backdrop of recent market volatility, over ninety percent of active mutual fund investors plan to maintain or increase their allocations to active funds over the next twelve months, according to a new survey published today by AMG Funds, the U.S. retail distribution arm of global asset management company, Affiliated Managers Group, Inc. (NYSE: AMG). The survey polled approximately 1,000 affluent individual investors with over $250,000 in household investable assets, on their forward expectations regarding equity markets and the macroeconomic environment, as well as their mindset and behaviors around investing.

The survey found that while virtually all respondents anticipate moderate to very high volatility over the next 12 months, nearly half (43%) of the investors are optimistic about improvements in the macro economy. These affluent investors also foresee fundamental changes in the economy, with the majority of respondents expecting a rise in interest rates (64%) and the rate of inflation (59%). Additional findings include:
  • Investment Goals: Wealth preservation ranks as investors' top investment goal (28%), followed by a near tie among diversification (23%), income generation (23%) and growth maximization (22%)
  • Volatility: 58% of affluent investors say large swings in the stock market make them very uncomfortable, and nearly half (48%) believe that portfolio volatility cannot be reduced without compromising growth
  • Diversification: While more than half (55%) of respondents believe their portfolio is adequately diversified, 49% believe that a portfolio is adequately diversified as long as it is invested across a broad range of stocks
  • Investment Advice: 48% of respondents say they need investment advice more today than they did in the past, and 42% are willing to pay more for oversight of their investments

"The findings of our study have implications for both clients and their financial advisors. While many affluent investors are optimistic about the forward trajectory of the economy, most respondents agree that ongoing market volatility will continue to impact their portfolios - and they may underestimate the investment returns required to meet their long-term objectives in such a market environment," said Jeffrey Cerutti, CEO of AMG Funds. "Given affluent investors' defined investment goals of wealth preservation, diversification, income generation and growth maximization, our study suggests that there is a meaningful opportunity to provide more guidance and education to this client base about effective investing during uneven markets, including the benefits of active management and alternative investments within a diversified portfolio."

The study also revealed the following insights into investors' perspectives regarding the next 12 months:

  • Actively-managed mutual funds remain popular: Over half (56%) of respondents say they currently own actively-managed mutual funds, and 93% of these individuals plan to maintain or increase their allocations to active funds over the next 12 months. In addition:
    • Of those offering an opinion, 75% of respondents believe that active management provides added value, agreeing that it is possible to outperform market indices through expert stock selection
    • Respondents who believe one can outperform the market see less risk in active funds (18% see high risk) than passive funds (23% see high risk)
    • When given a hypothetical choice, respondents assigned greater allocations to an active investment option (55%) than a passive investment option (45%)
      • The active allocation increases to 60% among those who expect macroeconomic headwinds, those who need more investment advice and those who believe it is possible to outperform the market through expert stock selection
  • Affluent investors would benefit from education on alternative investments: Most affluent investors admit to knowing little or nothing about alternative investments, indicating an opportunity for advisors to provide education on these products. To that end, the study found that:
    • Only one in ten respondents feels highly confident in selecting these investments without the guidance of a financial advisor
    • Although more than half (54%) of respondents indicate that alternatives are a 'mystery,' nearly half (47%) of investors wish they knew more
    • 77% of current investors in alternative products say that an advisor played a role in the purchase
    • At the same time, 54% of advised investors say they have never discussed alternative investments with their advisor

For the purposes of this study, alternative investments are defined as investments other than stocks, bonds or cash (e.g. hedge funds, private equity, real-estate funds and other non-traditional investments).

Methodology

The AMG Funds survey was conducted online among affluent investors with over $250,000 in household investable assets, who participate in making household savings and investment decisions. Data was collected between September 10 and 16, 2015, among 980 respondents, age 18 or older, through an online consumer panel. The data was weighted by distribution of age and investable assets to the 2013 Survey of Consumer Finance. Percentages may not total to 100 due to rounding.

About AMG and AMG Funds

AMG is a global asset management company with equity investments in leading boutique investment management firms. Through AMG's innovative partnership approach, each Affiliate's management team retains ownership of significant equity in their firm while maintaining operational and investment autonomy. AMG Funds LLC is the U.S. retail distribution arm of AMG. AMG Funds provides access to premier boutique asset managers through a unique partnership wherein the investment managers remain truly independent. AMG Funds is not beholden to a single investment approach or a single manager in delivering quality investment solutions. This innovative approach leverages the independent manager's specific expertise to deliver products that cover the complete asset class spectrum. AMG Funds offers unmatched access to specialized investment expertise by delivering the talents of independent management teams under a consolidated platform.

For more information on the results of AMG Funds' research, please visit www.amgfunds.com/wealth-trends.

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