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Fidelity® Research Finds Institutional Investors Globally are Looking for New Sources of Alpha

Release Date: 18 Mar 2019   |   BOSTON
Research: Financial

Institutions with More Than $1 Billion in Assets Expect to Increase Allocations in Active and Non- Traditional Passive, While Decreasing Allocations to Passively-Managed Strategies

BOSTON, March 18, 2019 -- Institutional investors are looking at ways to diversify sources of investment outperformance, also known as alpha, in preparation for a potentially lower return or more volatile market environment, according to the Fidelity® Global Institutional Investor Survey. The largest of its kind, the survey examines whats top-of-mind for 905 institutional investors across 25 countries representing $29 trillion in assets under management (AUM).

Looking ahead to 2025, when asked to share their portfolio construction strategies,institutions with $1 billion or more in AUM generally expect to make the most significant changes to their asset allocation, including increasing investments in active, non-traditional passive, alternatives, and unconstrained strategies and derivatives.

The Fidelity survey found that institutions are pursuing different portfolio construction approaches in part because of their expectations for the future. Institutional investors said that when considering their investment portfolios, their top concern was a low-return environment (21 percent), closely followed by volatility (17 percent).

“Institutions realize that in the long-term, market activity may no longer be enough to generate returns, so they have to work smarter to reach their goals,” said Jeff Mitchell, chief investment officer, Fidelity Institutional Asset Management®. “Institutions are restructuring their portfolios to reflect this changing investment ecosystem, whether by increasing allocations to certain investment styles or asset classes, or embracing new investment strategies.”

According to the survey, institutions also recognize technologys influence on the markets and portfolio strategies: 62 percent expect that advances in technology, such as high frequency trading algorithms and quantitative investment strategies, will make the markets more efficient.

Fidelity® Global Institutional Investor Survey: New Sources of Alpha

Technology continues to fundamentally change the industry and how we think about investing,” said Judy Marlinski, president of Fidelity Institutional Asset Management. We encourage institutions to collaborate with their investment partners – investors and asset managers alike can work to foster a culture of innovation in investing, and support it by developing appropriate processes for due diligence and monitoring results. At Fidelity, we continue to focus on innovation across a wide range of investing solutions.”

While many institutions of all sizes plan to make changes to their investment approaches, the Fidelity survey found that larger institutions, defined as those with $1 billion or more in AUM, are much more likely to be planning the following changes to asset allocation than smaller institutions, with less than $1 billion in AUM:

  • Larger institutions expect to decrease passive allocations and increase allocations in active and non-traditional passive, including factor-based, non-cap weighted, or other “smart beta” strategies. Smaller institutions also plan to increasingly use non-traditional passive strategies, but are less likely as a group to shrink traditional passive exposure and increase the use of active strategies; however, they currently hold higher allocations of actively managed strategies (58 percent versus 44 percent of institutions overall).
  • Larger institutions said they plan to increase private equity and infrastructure allocations more often than smaller institutions. However, institutions of all sizes intend to decrease investments in developed market equity and increase emerging market equity holdings.
  • Larger institutions expect to use more unconstrained strategies and derivatives in the future, while smaller institutions are less likely to use these strategies.

“Larger institutions may be leading the trend toward restructuring their portfolios, but we expect these trends to be adopted more broadly throughout the wealth management industry,” said Marlinski.

For additional details on the survey, go to

About the Survey

Fidelity Institutional Asset Management® conducted the Fidelity Global Institutional Investor Survey of institutional investors in 2018, including 905 investors in 25 countries including pensions, insurance companies and financial institutions. Assets under management represented by respondents totaled more than USD$29 trillion.

The surveys were executed in association with Strategic Insight, Inc. in North America and FT Remark, a Division of the Financial Times, in all other regions. CEOs, COOs, CFOs, and CIOs responded to an online questionnaire or telephone inquiry.

About Fidelity Institutional Asset Management

Fidelity Institutional Asset Management® (FIAM®) is one of the largest organizations serving the U.S. institutional marketplace. It works with financial advisors and advisory firms, offering them resources to help investors plan and achieve their goals; it also works with institutions and consultants to meet their varying and custom investment needs. FIAM provides actionable strategies, enabling its clients to stand out in the marketplace, and is a gateway to Fidelitys original insight and diverse investment capabilities across equity, fixed income, highincome and global asset allocation. Fidelity Institutional Asset Management is a division of Fidelity Investments.

About Fidelity Investments

Fidelitys mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $7.3 trillion, including managed assets of $2.6 trillion as of February 28, 2019, we focus on meeting the unique needs of a diverse set of customers: helping more than 30 million people invest their own life savings, 22,000 businesses manage employee benefit programs, as well as providing more than 13,500 financial advisory firms with investment and technology solutions to invest their own clients money. Privately held for more than 70 years, Fidelity employs more than 40,000 associates who are focused on the long- term success of our customers. For more information about Fidelity Investments, visit

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The information contained herein is general in nature, is provided for informational purposes only and is not legal advice. Fidelity does not provide advice of any kind.

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Products and services provided through Fidelity Institutional Asset Management® (FIAM®) to investment professionals, plan sponsors and institutional investors by Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917.

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