What are the preferred investments of savings professionals?
The Nortia Observatory on independent financial advice, based on the activity of more than 2,600 financial planners, shows that the investment decisions and strategies of investment professionals prioritized risk aversion in the third quarter.
Against the backdrop of a sluggish stock market and numerous geopolitical tensions, the survey reports that, when it comes to life insurance, financial advisors have prioritized inflows into euro-denominated funds over those into unit-linked funds, with only 42% of the investment volume going into the latter, compared with 58% in the previous quarter.
Euro-denominated funds are regaining the upper hand
“This decline is not surprising and is consistent with the cautious approach adopted by wealth management firms since the beginning of the year. Furthermore, this is not necessarily a favorable time for risk-taking, given the bonus offers from certain companies, which allow clients to earn returns of around 4.50% on euro-denominated funds, regardless of the contract’s unit-linked exposure,” explains Nortia.
As for unit-linked products, structured products remain the preferred choice, with 28.4% of inflows directed toward these products within the unit-linked segment. Real estate funds, the second-largest asset class for unit-linked products, saw a slight decline, accounting for 19.8% of inflows (compared to 22.3% in Q2).
Wealth management advisors have been particularly active with these products, executing outflows, mainly from SCs and SCIs. Bonds round out the top three, accounting for 17.8% of inflows into the unit-linked segment of life insurance. “This asset class continues to be driven by the success of dated funds, which have stood the test of time, with new products currently being launched or already available,” the survey notes.
The Comeback of Money Market Investments
Money market funds, continuing the trend from the first half of the year, are reaffirming their resurgence in portfolio construction, accounting for 12.8% of new assets under management. “These investment vehicles have regained their appeal and offer attractive returns at a time when investors are hesitant to move into riskier assets and prefer to wait and see,” comments Nicolas Lemaire, a financial engineer at Nortia.
Finally, equity funds continue to account for less than 10% of inflows in the unit-linked segment. “Although we’re seeing a slight increase compared to the last quarter, clients are still not returning to this type of product, which has been neglected since the start of the war in Ukraine. They prefer to gain exposure to the equity market through a structured product with a single-stock or index-based underlying asset. Since these products offer a capital protection barrier, this can have a psychological effect when clients make a subscription.”
Investment Decisions: Prioritizing Quantifiable Returns
In terms of arbitrage, as in the second quarter, wealth management firms continued to be active in managing their clients’ existing contracts during the third quarter. This trend is even accelerating, with 6.54% of Nortia Life’s outstanding portfolio subject to arbitrage during the period—a historically high level since the observatory was established.
As with inflows, this quarter’s biggest winners in terms of arbitrage are all tied to the bond market. Wealth management advisors are securing their asset allocations by repositioning themselves in asset classes where returns are most easily quantifiable, such as euro-denominated and money market funds—whose performance can be estimated over a one-year horizon—as well as dated funds and structured products, whose target performance is defined at the outset. In the real estate asset class, wealth management advisors have been particularly active, executing exit arbitrage strategies, primarily involving SCs and SCIs.
“Two trends are colliding: first, clients who have been invested in products for several years—and who have generated solid returns on their life insurance policies—tend to lock in their gains in the current environment. We’re also seeing clients shifting out of products that benefited from 0% fee launch campaigns, where they’re already locking in the year’s performance achieved since they first invested in the product,” explains Théo Liebgott, a junior financial engineer at Nortia.
Finally, for securities accounts, which also saw significant inflows, the trend is similar. Priority is given to structured products and fixed-income investments. More dynamic investment vehicles, such as stocks or dynamic flexible funds, are lagging behind, although a few equity mutual funds attracted inflows in the third quarter, such as certain global funds or those exposed to artificial intelligence.
