Returning to risk: Industry Research Report

Returning to risk

Published Date: September 2007

Published By: Datamonitor

Page Count: 16

Order Code: R313-25964

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DATAMONITOR VIEW: CATALYST; SUMMARY; THE RISK LEVEL AN INVESTOR IS COMFORTABLE WITH OFTEN REFLECTS EXTERNAL CIRCUMSTANCES; Many investors do not equate greater rewards with greater risk; THE 2002 BEAR MARKET LED TO A SWATHE OF DERISKING AMONGST HIGH NET WORTH CLIENTS; Investors are regularly ""spooked"" by well-publicized signs of stock market volatility or potential economic problems; Investors began to question their existing risk profile and demand more control over their investments; The rise of diversification and low risk products signaled a desire among investors to modulate risk and exposure to a single market; WITHIN THE INDUSTRY A RETURN TO RISK WAS NOTED AT THE BEGINNING OF 2007; Highly-leveraged, high-performance investments have spurred clients away from ""fear"" and into ""greed""; Investors' perception of what is high risk often differs from reality; In some quarters clients have been returning to risk for longer; THE CURRENT MARKET TURBULENCE HIGHLIGHTS THE DANGERS OF A HIGH RISK PROFILE; Times of crisis have a significant effect on the market for certain asset classes; Investment managers must take steps to ensure that the effect of future market shocks is mitigated; A MODERN APPROACH TO INCREASED RISK NEED NOT PUT INVESTORS AT THE MERCY OF THE MARKETS; Active management focused on risk can be used both to take advantage of high risk and reduce exposure when necessary; Higher risk tolerance in uncertain times can be made to benefit clients in the longer term; Diversifying risk, or investing in different types of risk, offer sophisticated versions of a high risk profile; RISK MANAGEMENT FOR PRIVATE CLIENTS REQUIRES A SOPHISTICATED INVESTMENT MANAGEMENT PROCESS; Many private banks are improving their processes already
APPENDIX: Definitions; Investor; Investment manager; Methodology; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Worldwide Mutual Fund Net Sales, 2005 - Q1 2007; Table 2: Cumulative European Equity Fund Sales and Net Sales, 2005-2007, EURm; Table 3: Annual European Equity Fund Sales Growth Rates (Projected for 2007) EURm; Table 4: Net Assets of European Guaranteed Funds, Q4 2006-Q4 2007, EURm
List of Figures: Figure 1: Sales and Redemptions of Equity Funds in Europe, 2005 - 2007e; Figure 2: Net Assets of European Guaranteed Funds, Q4 2006-Q4 2007, EURm; Figure 3: The key components of a smart risk strategy all work to ensure risk is appropriately controlled