Nine in 10 fund managers predict increased inclusion of alternatives, mostly private assets, infrastructure and hedge funds in core strategies over the next three years, according to a recent survey from Clearwater Analytics.

The research surveyed 250 senior executives at fund managers across the US, Europe and Asia Pacific. According to the results, fund managers are largely moving away from homogeneous approaches in favour of core-satellite asset allocation strategies.

Some 76% of respondents said advanced portfolio management systems have influenced the execution of core-satellite allocation strategies, while around 75% stressed the importance of integrated data analytics.

To respond to increased macro risks and volatility, more than half of respondents said they had increased their internal use of hedging strategies over the past year, with almost 80% forecasting further growth in these products. Some 89% of fund managers have increased their firm’s baseline trading and altered portfolio construction over the past 12 months.

However, the research noted this presents a conflict for fund managers, who are finding it difficult to maintain their longer-term allocations. Only 4% of the respondents said they felt no challenges in preserving their long-term investment horizons, with more than half saying it was a major challenge.

Keith Viverito, managing director EMEA at Clearwater Analytics, said: “Fund managers are confident in their goal-oriented strategies, yet more than half are struggling to execute their long-term visions because they are constantly forced to react to short-term volatility.”

On top of the shift in asset classes, managers were also moving their areas of focus away from the US. Around 69% of fund managers predicted a rotation away from the US towards Europe and thematic investing over the next two years.

Viverito added: “What stands out in this data is how many firms are making similar moves.

“That’s worth watching, because a strategy the whole market adopts together behaves differently than one only a few firms hold.”

This article first appeared in our sister publication, Portfolio Adviser.