Uncertainty propels investors towards active managers

Australian investors are looking to engage with active managers to navigate the heightened geopolitical volatility, according to a new survey.

The Schroders Global Investor Insights Survey 2025, which covers nearly 1000 institutional investors and wealth managers including 79 from Australia, found that 80% of global investors are more likely to increase allocations to actively managed investment strategies in the year ahead.

That sentiment is especially prominent in Australia, as 84% of Australian investors plan to do so, with 77% believing active management can "deliver value".

Investors are also actively seeking returns through both public and private markets, with public equities (46%) and private equity (53%) emerged as the preferred asset classes for the current environment.

Notably, more than two-thirds of investors (69%) who believe public equities will deliver strong returns think global equity allocations will deliver the strongest performance, Schroders said.

This shift underscores a growing conviction in reducing concentration risk and diversifying away from US mega caps, as 80% identified the S&P 500 as the index giving investors the greatest cause for concern about market concentration.

Schroders Australia chief executive and chief investment officer Simon Doyle said Australian investors are demonstrating a clear shift towards diversification and selectivity, increasingly turning to active management.

"We are seeing strong interest in both public and private markets, with conviction in global equities and private equity opportunities amongst Australian investors," Doyle said.

"Bonds continue to play a vital role in building resilient portfolios through diversification, downside protection, and liquidity. This dynamic, actively managed approach highlights the importance of adaptability in achieving robust long-term investment outcomes."

Although interest in private markets remains relatively high, many investors avoid the asset class due to the opacity the sector traditionally possesses.

Further, Australia also has a lower rate of understanding of private markets compared to its peers around the world.

ASIC has previously addressed the issue through its discussion paper published in February, highlighting the dynamics between public and private markets, as the industry suggested increased scrutiny especially around the "opaque" private credit sector.

Nevertheless, with a clear focus on outperformance, Doyle said investors are prioritising adaptability, whilst raising questions about the value of passive approaches in periods of greater unpredictability.

"Against the backdrop of trade and geopolitical uncertainty, investment priorities have shifted, with resilience now front of mind," Doyle continued.

"Since broad market gains can no longer be taken for granted, active strategies are playing a crucial role in helping investors manage complexity, build resilience within portfolios, and identify compelling opportunities."

Interestingly, the findings come as research shows active equity managers consistently struggle to outperform their related benchmarks in the face of several headwinds, including heightened market concentration and US equity dominance.