Approximately 70% of Millennial investors are interested in alternative mutual funds, and wish they knew more about the benefits of alternative investing, according to a recent survey 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 - including over 100 "Millennials" between the ages of 18 and 35 - on their forward expectations regarding equity markets and the macroeconomic environment, as well as their mindset and behaviors around investing.

The survey also found that while Millennials are generally optimistic with regard to the U.S. economy and global markets, their outlook is significantly impacted by market volatility. In addition, the results show that Millennials recognize the importance of active management in generating investment returns, as well as the value added by financial advisors in providing investment oversight.

Key Highlights from the Survey

According to the analysis, Millennials believe that:
  • Macroeconomic conditions will improve, and global markets will appreciate: 73% of Millennials anticipate that the U.S. economy will improve, and a majority expect U.S. and non-U.S. equity markets to rise (74% and 56%, respectively)
  • Alternative investments are appealing: 83% of Millennials are open to a broader approach to investing, including alternative strategies, compared to only 52% of investors over age 35. (For the purposes of this study, alternative strategies were defined as investments other than traditional stocks, bonds, or cash - e.g., hedge funds, private equity, real estate funds, or other non-traditional investments). In addition, while more than half of Millennials currently invest in alternative strategies, 69% wish they knew more about the benefits of alternative investing, and 70% believe that a "liquid alternative" mutual fund would benefit their current investment portfolio
  • Active management is important to portfolio performance: 78% of Millennials believe that active management provides incremental value - that it is possible to outperform market indices through expert stock selection. In addition, more than half (56%) of Millennials currently own actively-managed mutual funds, and almost all of these individuals (94%) plan to maintain or increase their current allocations to active funds
  • Growth maximization and income generation are equally important: 27% of Millennials rank growth maximization as their top investment goal, a natural focus for investors with a long-term investment horizon that outlasts near-term market volatility. Surprisingly, generating income - a goal typically associated with retirees - is equally popular among Millennials
  • The investment outlook is positive; however, their confidence is easily shaken by market volatility: 86% of Millennials surveyed claim to have a long-term outlook regarding their investments, 73% feel well-positioned for a market downturn and nearly half describe their risk tolerance as "aggressive." Contrary to their portrayed confidence, nearly 30% of Millennials -significantly more than any other age cohort - state that they would either reduce their equity exposure or exit the market entirely in the event of a 20% drawdown
  • Financial advisors provide key insights and offer valuable investment advice: 60% of Millennials are willing to pay more for oversight of their investments, and 90% of advised Millennials rely most on financial advisors for portfolio diversification. However, 72% of Millennials believe that a portfolio is adequately diversified as long as it includes a broad range of stocks, indicating the need for greater education and advice from financial advisors in helping Millennials to make investment decisions

"The findings of our study provide meaningful insight into the mindset and outlook of a highly important demographic among individual investors," said Jeffrey Cerutti, CEO of AMG Funds. "Our findings show that Millennials have an open mind with respect to investing, and that even in an increasingly technology-driven world, they value the skill of experts in both stock-picking and financial advice. Our findings are a call to action for advisors to engage with these clients, so they can address Millennials' unique investing needs and perspectives while providing advice and education around the benefits of alternative strategies and active management."

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.

To learn more about the Wealth Management Trends in America investor survey, please visit www.amgfunds.com/wealth-trends.

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