U.S. Investors Rewarded for Diversification in 2016, Shows Annual Natixis Global Portfolio Performance Comparison

  • U.S. places 2nd in international study of investment returns, trailing only U.K. investors
  • Nearly half of U.K. investment returns due to currency factors
  • Stocks drove performance as risk-taking paid off

BOSTON--()--U.S. investment portfolios performed better than most international peers in 2016, with average gains of 8.2%, lifted by the second-half surge by U.S. stocks, according to the annual Global Portfolio Barometer released today by Natixis Global Asset Management. The U.S. finished second in the study, trailing the United Kingdom with an average performance of over 13.5%. The results are based on in-depth proprietary research and reviews of moderate risk or balanced portfolios from financial advisors across the United States, France, Italy, Luxembourg, the Netherlands, Singapore, the United Kingdom and Latin America.

In the U.S., diversified portfolios tended to perform better in the first half, when two sharp, episodic bouts of volatility hit the markets – the first in January, when the S&P 500 Index had its worst opening since 1928, and the second in June, around the Brexit vote. In the second half, however, portfolios with a larger allocation to stocks tended to perform better.

“We saw the portfolio positioning that worked for investors in the first half of the year was vastly different in the second half, with strong equity markets driving overall performance in 2016,” said Marina Gross, Executive Vice President of Natixis’ Portfolio Research and Consulting Group. “While risk-taking investors benefited throughout 2016, we expect diversification will continue to be important as market volatility rises and investors brace for shocks due to global economic and political uncertainty.”

U.S. investors benefited from the gains in domestic stocks, as U.S. large-cap equities climbed 7.8% and small-cap stocks jumped 18.7%. There was a strong home country bias, as about two-thirds of assets invested in equities went to U.S. stocks. On average, U.S. portfolios allocated assets to:

  • Stocks: 52%
  • Bonds: 31%
  • Allocation funds: 7%
  • Alternatives: 5%
  • Real assets: 2%
  • Cash: 2%

About three-quarters of overall returns came from stocks. The remainder was split between bonds and allocation funds, which invest in a mix of assets.

Global Performance Differences

Currency factors had a significant impact, particularly for U.K. portfolios invested in equities outside their home market. In fact, Natixis found that half of the returns in U.K. adviser portfolios were due to the global diversification prevalent in U.K. portfolios, especially following the dramatic depreciation of the pound after the Brexit referendum. For example, a U.K. investor with unhedged U.S. equity exposure would have gained an extra 19% in returns on those investments in 2016 due to the depreciation of the pound against the dollar.

Risk assets, such as equities and high yield bonds, generally rallied worldwide in 2016 and portfolio performance was positive in all regions analyzed by Natixis. Outside of the U.K. and U.S., investment gains in other regions were lower, between 3% and 8% for the year. Natixis found the difference in returns between nations were almost entirely due to differences in how their equity investments performed. Home country bias in equity investing rewarded investors in the U.K., where the FTSE 100 was up 14.4, and in the U.S., where the S&P 500® gained 9.5%. By comparison, the Euro Stoxx 50 was flat, with a performance of 0.7%, and global equities returned 5.3%.

The biggest difference in asset class returns were from alternative strategies, which varied from -2.1% for Luxembourg-based advisers to +3.9% in the U.K. Although the returns are relatively modest, they underline advisers’ tendency to allocate to low-risk, low-return, alternative strategies as a replacement for fixed income, rather than to higher-risk, higher-return strategies.

Methodology

All figures, unless otherwise stated, are derived from detailed analysis conducted by the Portfolio Research and Consulting Group of 564 moderate risk model portfolios received in the last six months of 2016 across eight locations: France, Italy, Latin America, Luxembourg, the Netherlands, Singapore, the United Kingdom and the United States. The data covers portfolios in the six months from July-December 2016. The Moderate Model Portfolios data is based on model portfolios that have been analyzed by the Portfolio Research & Consulting Group and have been designated as moderate by investment professionals. The Portfolio Research & Consulting Group collects portfolio data and aggregates it in accordance with the peer group portfolio category that is assigned to an individual portfolio by the investment professionals. The categorization of individual portfolios is not determined by Natixis Global Asset Management, as Natixis’ role is solely as an aggregator of the pre-categorized portfolios. Please note that risk attributes of portfolios will change over time due to movements in the capital markets. Portfolio allocations provided to Natixis are static in nature and subsequent changes in an investment professional’s portfolio allocations may not be reflected in the current data. U.S. Large cap equities represented by the S&P 500® and small company stocks represented by the S&P 600®. Asset classes are based on Morningstar categories. Real assets represent the sum of commodities, property and miscellaneous.

Risks

Investing involves risk, including the risk of loss. Alternative investments involve unique risks that may be different from those associated with traditional investments, including illiquidity and the potential for amplified losses or gains. Investors should fully understand the risks associated with any investment prior to investing. Diversification does not guarantee a profit or protect against a loss.

About Natixis Portfolio Clarity®

Natixis Portfolio Clarity® is a portfolio consulting service provided by the company’s Portfolio Research and Consulting Group, where specialized consultants work with investment professionals who seek a deeper level of insight to build smarter portfolios, using sophisticated analytic tools to identify and quantify sources of risk and return.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed are as of January 27, 2017. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Global Asset Management, or any of its affiliates.

There can be no assurance that developments will transpire as forecast, and actual results will be different. Data and analysis does not represent the actual or expected future performance of any investment product. We believe the information, including that obtained from outside sources, to be correct, but we cannot guarantee its accuracy. The information is subject to change at any time without notice.

About Natixis Global Asset Management, S.A.

Natixis Global Asset Management serves thoughtful investment professionals with more insightful ways to understand and manage risk. Through our Durable Portfolio Construction® approach, we help them construct more strategic portfolios that seek to produce better outcomes in today’s unpredictable markets. We draw from deep investor and industry insights and partner closely with our clients to put objective data behind the discussion.

Natixis is ranked among the world’s largest asset management firms.1 Uniting over 20 specialized investment managers globally ($897 billion AUM2), we bring a diverse range of solutions tailored to meet every strategic challenge. From insight to action, Natixis helps our clients better serve their own with more durable portfolios.

Headquartered in Paris and Boston, Natixis Global Asset Management, S.A.’s assets under management totaled $897 billion as of September 30, 2016.2 Natixis Global Asset Management, S.A. is part of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Global Asset Management, S.A.’s affiliated investment management firms and distribution and service groups include Active Index AdvisorsSM;3 AEW Capital Management; AEW Europe; AlphaSimplex Group; Axeltis; Darius Capital Partners; DNCA Investments;4 Dorval Finance;5 Emerise;6 Gateway Investment Advisers; H2O Asset Management;7 Harris Associates; IDFC Asset Management Company; Loomis, Sayles & Company; Managed Portfolio Advisors®;3 McDonnell Investment Management; Mirova;5 Natixis Asset Management; Ossiam; Seeyond;7 Vaughan Nelson Investment Management; Vega Investment Managers; and Natixis Global Asset Management Private Equity, which includes Seventure Partners, Naxicap Partners, Alliance Entreprendre, Euro Private Equity, Caspian Private Equity and Eagle Asia Partners. Visit ngam.natixis.com for more information.

1 Cerulli Quantitative Update: Global Markets 2016 ranked Natixis Global Asset Management, S.A. as the 16th largest asset manager in the world based on assets under management ($870.3 billion) as of December 31, 2015
2 Net asset value as of September 30, 2016. Assets under management (AUM) may include assets for which non-regulatory AUM services are provided. Non-regulatory AUM includes assets which do not fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part 1.
3 A division of NGAM Advisors, L.P.
4 A brand of DNCA Finance.
5 A subsidiary of Natixis Asset Management.
6 A brand of Natixis Asset Management and Natixis Asset Management Asia Limited, based in Singapore and Paris.
7 A brand of Natixis Asset Management.

Contacts

Natixis Global Asset Management
Maggie McCuen, 617-449-2543
Maggie.McCuen@ngam.natixis.com
or
Ted Meyer, 617-449-2507
Ted.Meyer@ngam.natixis.com

Release Summary

U.S. Investors Rewarded for Diversification in 2016, Shows Annual Natixis Global Portfolio Performance Comparison.

Contacts

Natixis Global Asset Management
Maggie McCuen, 617-449-2543
Maggie.McCuen@ngam.natixis.com
or
Ted Meyer, 617-449-2507
Ted.Meyer@ngam.natixis.com