NEW YORK, Nov. 19, 2015 /PRNewswire/ -- In today's
market environment, characterized by low interest rates and low
return expectations, a majority of financial advisors believe that
now is the right time to increase their allocation to active
investment strategies, according to a survey of more than 200
financial advisors conducted by AllianceBernstein ("AB") at the
2015 Annual Schwab IMPACT Conference in Boston from November
10-13, 2015.
While 72 percent of advisors reported that they currently use
ETFs in client portfolios, nearly seven in 10 (68 percent) state
that market conditions favor an active approach to asset
management. In particular, as concerns about the safety of
high-yield ETFs continue to escalate, advisors are increasingly
looking elsewhere to exposure to this asset class. Nearly
two-thirds (65 percent) of advisors either do not use high-yield
ETFs or plan to decrease their exposure to these funds in the next
year.
"More and more financial advisors are recognizing that if you're
looking for long-term exposure to high yield, passive ETFs are a
bad investment," said Gershon
Distenfeld, Director of High Yield at AB. "The math speaks
for itself: over the first nine months of the year, the two largest
ETFs have sharply underperformed the average active manager, not to
mention their own benchmarks. Being tied to an index means ETFs
can't pick and choose their exposures to sectors or securities the
way active managers can, and in less liquid asset classes like high
yield, the average long-term investor really gets hurt going
passive."
Financial advisors are also finding that liquidity risk can be
easily misunderstood and mismanaged. According to AB's latest
survey results, nearly one-third (30 percent) of financial advisors
feel they do not have a strong understanding of the liquidity
issues impacting the fixed income market.
Those who do understand the risks of liquidity indicate that it
is the most significant cause of concern preventing greater
adoption of high-yield ETFs in their portfolios. Thirty-two
percent of respondents cited liquidity issues as their biggest
concern for investing in high-yield ETFs, followed by
underperformance relative to actively managed fixed income funds
(22 percent), complexity of the asset class (12 percent), hidden
fees (4 percent) and another 30 percent cited a varying range of
other challenges and issues.
"While the lack of liquidity in the market is clearly a risk, it
can also provide an opportunity for additional returns to active
managers that are able to stay out of crowed trades and keep cash
on hand," said Ashish Shah, Head of
Credit at AB. "Every financial advisor should be asking money
managers what they are doing differently in this low liquidity
environment – and the answer is clearly 'nothing' if you are using
a passive strategy."
About the Survey
The survey was conducted onsite at the 2015 Schwab IMPACT
conference with approximately 205 financial advisors and financial
professionals being surveyed.
About AB
AB is a leading global investment management firm that offers
high-quality research and diversified investment services to
institutional investors, individuals and private wealth clients in
major world markets.
As of September 30, 2015, AB
Holding owned approximately 36.2% of the issued and outstanding AB
Units and AXA, one of the largest global financial services
organizations, owned an approximate 63.4% economic interest in
AB.
Additional information about AB may be found on our
website, www.abglobal.com.
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SOURCE AB