Institutional investors consider alternative indexes

1285563_measuring_tape_detail_2Institutional investors across the globe are increasingly looking at alternative indexes, according to a survey.

The Northern Trust survey finds that 32% are looking at alternative indexes and three in 10 have an existing allocation. Of those using alternative indexes, 60% have increased their allocation over the past two years.

As investors face a more challenging environment, they seek increased control and flexibility in their passive mandates, and this has largely contributed to the increased interest in alternative indexes.

“Alternative indexes are appealing because they enable investors to access market returns by capturing exposure to specific factors such as value, momentum and volatility,” says Chad Ravkin, the company’s managing director of global index equity.

For half of the investors surveyed, the decision to allocate to alternative indexes sat within the active team. At less than 10% of firms, the index team made the decision to allocate to alternative indexes.

About 70% say the funding for the alternative index portion of their portfolio comes mainly from assets currently invested in active strategies.

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