Survey finds improved risk management and due diligence among PMs

Ten years after the 2008 financial crisis, there are signs of progress when it comes to risk management and due diligence for investment selection, suggests an in-house survey of CFA Montreal members.

The survey finds more than three-quarters of respondents (78%) agreed that they have observed a greater degree of responsibility among portfolio managers in the last decade (67% somewhat agree, 11% strongly agree)

A similar number of respondents (73%) agree that there is improved listening and adaptation to risk aversion and propensity (63% somewhat and 10% strongly).

Most (50% somewhat and 41% strongly) agreed that there’s been improvement in the importance placed on risk management, such as stress testing, as well as progress in investment selection according to environmental, social and governance (ESG) trends (52% somewhat, 39% strongly).

A large majority also agree (70% somewhat, 16% strongly) that improvements have been made in due diligence and the investment selection process.

Among investors, 65% of respondents noted an increased sense of responsibility  (57% somewhat agree, 8% strongly).

Risks ahead

In the short term, survey respondents estimate that the investments most at risk over the next 12 months are emerging market debt and equities (59% of respondents), high yield bonds (48%) and U.S. equities (38%).

As for the next financial crisis, 30% of respondents don’t expect one at all. The others were divided on when it would occur, with a plurality (30%) saying between 2020 and 2021.

The most common triggers of the next crisis (respondents were asked to choose all that apply) were a natural crisis cycle (49%), political instability and uncertainty (49%), a stock market bubble (39%), tariff wars (39%) and inflation (23%).

Most investors (57%) are showing a low level of concern about the next crisis, respondents said, while 38% show a high level of concern. Only 4% showed a very high level of concern.

For more details, see the full CFA Montreal survey.

About the survey: The survey was conducted online by CFA Montreal among 2,500 members between Aug. 20 and Sept. 6, 2018, and 227 members responded. The maximum margin of error of the survey is 6%, 19 times out of 20.

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The staff of Advisor.ca have been covering news for financial advisors since 1998.