A global study by Clearwater Analytics suggests rising market, credit and liquidity risks are prompting asset managers to rethink portfolio construction, with many increasing their use of alternatives, hedging strategies and broader diversification.
Asset managers are increasingly adapting portfolio strategies as multiple sources of risk build across financial markets, according to new research from Clearwater Analytics.
The study, which surveyed 250 senior executives across the US, Europe and Asia-Pacific, found rising concern around market, credit, liquidity and concentration risks.
Market risk saw the biggest increase, with 80% of respondents reporting a rise over the past year, while more than three-quarters said credit risk had increased.
Rather than responding to a single market challenge, firms are dealing with a combination of risks simultaneously, a trend that is influencing investment decision-making and portfolio construction.
Chris Sturhahn, head of product, asset management at Clearwater Analytics, said: “Market, credit, liquidity, and concentration risk are all rising at nearly every firm that responded.
“That’s a harder problem than any one risk moving by itself, and it’s a big part of why we’re seeing firms shift into alternatives, expand hedging, and rotate into new markets and regions.”
The findings suggest diversification remains a key focus for investment teams. As traditional market relationships become less predictable, asset managers are looking for new sources of return and resilience, while seeking to manage downside risk.
Liquidity risk was identified as one of the key concerns for the coming year, alongside credit risk. More than a third of respondents also highlighted concentration risk as a significant threat, reflecting concerns around crowded trades and market leadership becoming increasingly narrow.
According to Sturhahn, the operational side of investment management is also becoming more important as portfolios grow more complex.
“Operational risk has become a major focus for asset managers as portfolios grow more complex, reporting requirements intensify and market events unfold much more quickly.”
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