Advisors favor active management to navigate unsettled markets, PGIM study finds

Rhea-AI Summary

PGIM Investments' recent survey of over 500 financial advisors reveals a significant reliance on active management strategies, with 62% allocating client assets actively. Advisors are increasingly using active management to meet investment objectives, particularly in volatile markets. Key findings include a preference for active strategies to access emerging markets, protect against declines, and achieve reliable income. The impact of COVID-19 on portfolio construction is prominent, with 76% of advisors indicating its influence. The survey highlights a shift towards more ETFs and ESG strategies in the coming years.

Positive

• 62% of financial advisors allocate client assets to active management.
• Advisors prefer active management for various investment objectives, including emerging markets and income generation.
• 76% of advisors say COVID-19 is influencing their portfolio construction.
• Anticipated increase in ETF use by 65% and ESG allocations by over 54% in the next three years.

Negative

• 68% of advisors indicate stock market volatility as their top portfolio management concern.

NEWARK, N.J.--(BUSINESS WIRE)-- With choppy markets reflecting both optimism and uncertainty about an unfolding recovery, financial advisors are relying heavily on actively managed strategies to navigate the road ahead, according to a new PGIM Investments survey of more than 500 financial advisors. PGIM Investments is part of PGIM, the $1.5 trillion global investment management business of Prudential Financial, Inc. (NYSE: PRU).

Stuart Parker, PGIM Investments President and CEO (Photo: Business Wire)

The survey found that advisors allocate a substantial percentage of client assets to active management (62%), while also leaving room for passive strategies (34%). They anticipate this allocation will remain largely the same over the next three years. Advisors also shared the following beliefs about active management:

“What we’ve found through both our research and our experience is that financial advisors continue to use a mix of both active and passive but rely more heavily on actively managed solutions within client portfolios,” said Stuart Parker, president and CEO of PGIM Investments. “The ability to generate alpha for clients, particularly during periods of market volatility, is critical.”

Advisors prefer active management to meet most investment objectives

PGIM’s survey also found that advisors prefer active management to meet most investment objectives, including:

• Accessing emerging market opportunities.
• Protecting against market declines.
• Providing risk-adjusted returns.
• Generating reliable income.

Managing tax liability was the only instance where advisors showed a slight preference for passive management.

How advisors are positioning client portfolios for a pandemic and beyond

Given the pandemic’s devastating impact on global economies and markets, it’s not surprising that most advisors (76%) say COVID-19 is influencing how they construct client portfolios in 2021. Approximately two-thirds (68%) indicate stock market volatility is their top portfolio management concern. Additional findings include:

• Investment Vehicles: While nearly all financial advisors (98%) currently use and will likely continue to use mutual funds, over the next three years 65% anticipate using more exchange-traded funds (ETFs) and 41% anticipate greater use of separately managed accounts.
• Asset Allocation: As expected, advisors use a mix of asset classes across client portfolios, including U.S., international, and emerging market equities; fixed income and alternative strategies. In the next three years, advisors anticipate increasing equity allocations in international/global and emerging markets.
• Search for Yield: Within fixed income, advisors see high-yield bonds, investment- grade corporate bonds, and emerging market debt as the top three opportunities for generating yield in 2021.
• Environmental, Social, Governance (ESG): Two-thirds (66%) of advisors say their average client is at least somewhat familiar with ESG investing, and over half (54%) anticipate increasing allocations to ESG strategies in the next three years.

Read the full report, Seeking the Active Advantage in Uncertain Times, for detailed research findings.

ABOUT THE SURVEY

This survey of 509 U.S. financial professionals who sell mutual funds, ETFs, and/or target date funds was conducted by Escalent on behalf of PGIM Investments between Jan. 27 and Feb. 19, 2021. Respondents met the following criteria: Have a current book of business; Are between 28 and 65 years of age; Have a Series 6 and/or 7 professional license; At least 3 years’ experience as a licensed investment professional; Firm assets under management (AUM) of at least $25 million.

ABOUT PGIM INVESTMENTS

PGIM Investments LLC and its affiliates offer more than 100 funds globally across a broad spectrum of asset classes and investment styles. All products draw on PGIM’s globally diversified investment platform that encompasses the expertise of managers across fixed income, equities, alternatives and real estate.

ABOUT PGIM

PGIM, the global asset management business of Prudential Financial, Inc. (NYSE: PRU), ranks among the top 10 largest asset managers in the world¹ with more than $1.5 trillion in assets under management as of June 30, 2021. With offices in 16 countries, PGIM’s businesses offer a range of investment solutions for retail and institutional investors around the world across a broad range of asset classes, including public fixed income, private fixed income, fundamental equity, quantitative equity, real estate and alternatives. For more information about PGIM, visit pgim.com.

Prudential Financial, Inc. (PFI) of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom, or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. For more information please visit news.prudential.com.

1 Prudential Financial, Inc. (PFI) is the 10th-largest investment manager (out of 477) in terms of global AUM based on the Pensions & Investments Top Money Managers list published on May 31, 2021. This ranking represents assets managed by PFI as of Dec. 31, 2020.

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact a financial professional.

© 2021 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20210907005122/en/

MEDIA CONTACT

Kylie Scott

+1 973-902-2503

kylie.scott@pgim.com

Source: PGIM Investments

FAQ

What does the PGIM Investments survey reveal about financial advisors' asset management strategies for PRU?

The survey shows that 62% of financial advisors allocate client assets to active management, reflecting a reliance on strategies during market volatility.

How are financial advisors adapting portfolios in response to COVID-19 according to the survey?

The survey reports that 76% of advisors claim that COVID-19 is influencing their approach to portfolio construction in 2021.

What percentage of advisors prefer active management for income generation in the PGIM Investments survey?

The survey indicates that a substantial number of advisors prefer active management for generating reliable income.

Which investment vehicles are gaining popularity among financial advisors according to the survey?

The survey shows a projected increase in the use of exchange-traded funds (ETFs) by 65% among financial advisors over the next three years.

How many financial advisors participated in the PGIM Investments survey?

The survey included responses from 509 U.S. financial professionals.