Spanish investors overestimate passive investment benefits

Most of Spanish investors’ expectations don’t reflect a full understanding of the risks of index funds versus the benefits, a research from Natixis Global Asset Management suggests.

Almost seven in ten Spanish investors agree that index funds and exchange traded funds (ETFs) are a cheaper way to invest, but 64% also believe they are less risky, according to Natixis’ survey of 400 individual investors in Spain.

Investors seem to be unclear about what they are trying to accomplish and where the threats lie, the survey shows.

Spanish investors seem to be hungry for a new model of investing that could adapt to changing markets, as 78% of Spanish investors don’t believe a traditional approach to equities and bonds within a portfolio allocation is the best way to pursue returns and manage investments.

Indeed, 69% of Spanish investors want new portfolio strategies that help better manage risk and 73% want new portfolio strategies that can help better diversify their portfolio.

In other words, they want an approach that would seem to open the door to wider ownership of alternative investments (including strategies such as hedge funds, private equity, real estate assets, long short funds, managed futures and absolute return).

Sophie del Campo, Head of Natixis Global AM, Iberia Latin America and US offshore, explains that “index funds may have a place in portfolios, but they don’t necessarily fit in every investor’s strategy, where active management is key to enhance greater diversification, generate performance and build more resilient portfolios”.

Recent surveys of institutional investors and financial advisors by Natixis showed they preferred active strategies to take advantage of market movements, generate alpha and provide risk-adjusted returns, while viewing passive investing primarily as a way to save on management fees.

“It is critical to understand the risks in your portfolio and to identify the sources of diversification, so it’s troubling to see investors overestimating the benefits of passive investments,” del Campo said.

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