Fund selectors worldwide have been increasing their usage of third-party managers in recent years, according to a Natixis survey, with a strong focus in 2023 on fixed income and alternatives in Asia. 

Self-reported use of third-party managers grew from 11 percent in 2021 to 24 percent in 2023, according to a Natixis Investment Management (IM) survey of fund selectors globally. 

This is in part due to demand for model portfolios with 72 percent of respondents reporting that their firm offers some sort of model program.

Bonds Are Back

Especially in Asia, fixed income is a highly favored asset class due to the insatiable demand for yield. 

63 percent of fund selectors in the region say they will increase investments in government bonds (51 percent globally) while 54 percent will increase allocation to investment grade corporate bonds (46 percent globally). 

Alts, ESG

Another key area of focus is alternatives, where six in ten respondents in Asia say they are recommending increased allocations due to greater market risks. Within the asset class, fund selectors in Asia are most likely to increase allocations to infrastructure (60 percent) alongside private equity (32 percent), absolute return strategies (32 percent) and commodities (32 percent). 

The area that will see the largest allocation boost is ESG investing with 61 percent of fund selectors seeking to increase allocations and 77 percent seeing increasing demand for impact investments.

Market Outlook

In terms of the 2023 outlook, fund selectors in Asia chose volatility (65 percent), interest rates (56 percent) and inflation (51 percent) as top portfolio concerns. With regard to the economy, US-China relations (63 percent) were viewed as the biggest risk. 

«Fund selectors are looking to balance challenging markets and evolving client needs by adjusting bond holdings to better yield potential, capturing the upside of market dislocations in equity weightings, and turning up the risk management potential of alternatives,» said Natixis IM Singapore CEO Dora Seow. 

Natixis IM surveyed 441 professional fund selectors managing over $30 trillion in total client assets at wealth management, private banking and insurance platforms globally, including 43 based in Asia.