Absolute return (AR) strategies appear to be gaining acceptance and momentum among financial advisers, according to the Brinker Capital’s Q4 Brinker Barometer survey.
Almost half (48 per cent) of advisers said they already use AR strategies in their client portfolios, nine per cent said they do not but plan to do so this year, and 46 per cent of those who indicated use of AR noted they will increase their allocation in 2013.
Sixty-five per cent of respondents said they view AR as a complement to relative return strategies, versus 23 per cent who position it as part of a core/satellite strategy, and 12 per cent who use it as a fixed income substitute.
Asked how they access AR strategies for their clients, 57 per cent of advisers said “through separately managed accounts,” and 35 per cent said “through mutual funds.” Only two per cent of respondents access hedge funds directly on their clients’ behalf.
In addition to upping their absolute return allocations in 2013, 54 per cent of advisers plan to increase their clients’ equity exposure, and 48 per cent said they will add to their emerging markets allocations. To underscore their bullish attitudes towards equities, fully 85 per cent of advisers polled believe equities will raise more assets than fixed income in 2013, yet 51 per cent of respondents plan to keep their clients’ fixed income exposure in line with 2012 allocations.
Private equity and international investments were two areas in which advisers said they will decrease portfolio allocations by 65 per cent and 57 per cent, respectively.
When asked about their confidence that in 2013 clients would be better able to stay on the path to retirement, the majority of advisers (54 per cent) said they were “highly confident” or “confident”. Forty two per cent answered “somewhat confident,” and just four per cent indicated they were “not at all confident.” When it comes to measuring how their clients are progressing towards financially viable retirement, 79 per cent of advisers said they use investor-stated objectives rather than comparison to a traditional investment benchmark like the S&P 500.
Turning briefly to the political landscape, 60 per cent of respondents said that if they had to give President Obama one piece of advice related to the debt crisis, it would be to save money by “making cuts in entitlements.” Asked what advice they would give Congress, 65 per cent of advisers said “put aside partisan differences and make decisions based on the good of the nation.”
The use of social media appears to be on the rise among advisers, with 73 per cent saying they have read financial or investing blogs in the past six months, 69 per cent indicated increased usage of smart phones or tablets for work purposes, and 59 per cent created or updated their LinkedIn profile.
“What a difference a year makes,” says Brinker Capital vice chairman John Coyne. “Throughout most of 2012, financial advisers were pessimistic about almost every topic we asked, from market performance and clients’ retirement readiness to the economy and the outcome of the presidential election. Just 12 months later it appears as though advisers have breathed a collective sigh of relief that the election is over, the country has sidestepped the fiscal cliff and financial markets appeared to be performing in line with or ahead of advisers’ January 2013 expectations.”
