Passive investing may mask risks of looming financial crisis: poll

Singapore

A MAJORITY of institutional investors are expecting a global financial crisis to hit in the next one to five years, and most are worried about the market risk posed by passive investments, according to a poll by Natixis Investment Managers.

Two-thirds of institutional investors believe that the popularity of passive investments has increased systemic risk, with a majority highlighting that flows into passive strategies have artificially suppressed volatility. More than half of them are also of the view that passive investing has distorted relative stock prices and risk-return trade-offs.