State Street Global Advisors Research Examines Investors' Risk Awareness Amid Market Volatility
- High net worth investors and investors working with an advisor are more likely to feel informed about risk
- Half of financial advisors are "allocating to alternative investments/strategies" to manage portfolio risk
- Over two-thirds of Millennials are investing in alternatives
- Significant jump in percentage of individual investors who believe ETFs help improve performance and make them a better investor
- Top predictions for ETF growth in 2025-2026 and beyond, trends data, and what's next for investors
State Street Global Advisors, the asset management business of State Street Corporation (NYSE:STT), today released its ETFs in Focus Study: Risk Management Attitudes & Behaviors and its ETF Impact Report 2025-2026.
The study is part of State Street Global Advisors ETF Impact series, which was created to explore the evolving role of ETFs in portfolio construction, risk perceptions, and investor behavior. Conducted annually since 2022, this applied research provides deep insights into the ETF landscape, identifying key trends shaping portfolio decisions.
Market conditions have forced investors to adapt quickly and remain versatile during a time of extreme volatility. This new research examines how investors are managing risk, navigating uncertainty, and adapting to macroeconomic and market shifts. It also examines the more prominent role alternative investments are playing in portfolios, especially among financial advisors seeking to reduce clients' exposure to public markets and diversify portfolios.
"As the market absorbs tariff impacts and ongoing uncertainty, questions around risk, diversification, and access to liquid, flexible investment tools are front and center," said Anna Paglia, chief business officer at State Street Global Advisors. "Our research addresses key questions about portfolio resilience."
Tariffs and Trade Wars Top the List of Perceived Portfolio Risks Pre-Liberation Day
The ETFs in Focus study found that just prior to the president's tariff announcement which sent markets tumbling, just over half (55%) of investors say they felt informed about the risk to their portfolios.
Furthermore, despite all the talk about inflation, the study found that even before Liberation Day, tariffs and trade wars were perceived to be the greatest risk to portfolios in the coming 12-18 months among all investor types surveyed: self-directed, hybrid and advised. Self-directed investors were the most worried at 47%, followed by advised at 44% and hybrid at 37%. Fear over unexpected inflation was more subdued compared to fear over tariffs, with 33% of self-directed investors showing concern about rising prices, and 35% of hybrid and advised.
ETFs Prevail as Essential Portfolio Building Blocks
The study also confirms what research in recent years has shown: investors still see ETFs as essential portfolio building blocks during times of volatility. That sentiment is strongest among individual investors with more than $250,000 in investable assets: 65% agree that ETFs help improve overall performance — a significant jump from 59% in 2022. The uptick in the percentage of investors who believe ETFs make them a better investor is also notable, jumping to 62% from 54% last year.
Investors Differ In Their Approach to Risk
Not all investors are alike when it comes to their preferred strategy for managing risk, but most are sticking to time-tested approaches that have been known to prevail in the long-term. While many are taking a more traditional approach in their asset allocation and making sure they're diversified, others are doing nothing, preferring not to make any sudden moves in anticipation of changing market conditions.
Overall, nearly half of all investors are managing risk in their portfolios by taking the traditional approach of "avoiding high-risk investments" and/or "diversification." Over a third are also managing risk by "holding cash or cash equivalents."
Alternative Investments Are Top Risk Management Strategy Used by Advisors
The study reveals two clear strategies are emerging in how financial advisors are helping clients navigate perceived threats: the use of alternatives and the use of cash. Notably, just as many are likely to use alternative investment strategies as they are to hold cash amid the uncertainty.
When it comes to alternatives, half of financial advisors are "allocating to alternative investments/strategies" to manage portfolio risk. And 79% "plan to increase their allocation to alternative ETF strategies" over the next year or so. Since 2022, alternative ETF assets under management have grown from $27.58 billion to $148.81 billion by the end of 2024.1
When it comes to cash, nearly half (47%) are "increasing allocation to cash or cash equivalents" and/or performing "diversification across asset classes."
The two drivers that rise to the top as having a significant influence on financial advisors' decision to incorporate or increase allocation of alternative investments/strategies into their clients' portfolios are "reduce exposure to public markets" and "alternative sources of return."
This is not surprising as we see the acceptance of a 60/40 portfolio continue to wane. At the same time, alternatives are becoming less "alternative," as investors continue to look for asset classes and strategies that offer lower correlations, help diversify beyond stocks and bonds, and help manage risk.
In fact, one of the driving forces behind increased allocations to alternatives is investor demand. The study found that millennials, in particular, are pushing this trend forward with over two-thirds (69%) investing in alternatives compared to 56% of Gen X investors and 46% of Baby Boomers.
State Street Global Advisors' Releases ETF Impact Report 2025-2026 to Help Investors Navigate the Challenging Market Ahead
State Street Global Advisors also released today the ETF Impact Report 2025-2026 which explores emerging ETF trends shaping the industry.
Looking ahead at what's next for the future of ETFs, the report offers nine predictions that could spark ETF growth in 2025 and beyond, including:
- The global ETF market takes in $2 trillion in 2025
- Global gold fund assets under management will crack $500 billion by 2026
- Global active fixed income ETF assets under management will hit $700 billion by the end of 2026
- Bank loan and CLO ETF assets under management will overtake traditional high yield by 2026
- AI will lead thematic ETFs to record flows in 2025
- More AI-powered ETFs will run on blockchain
- Private and public markets will blur thanks to ETFs
- Alternative ETFs will go mainstream
- Multi-share-class innovation will reshape retirement
For an analysis of the trends behind these predictions, read the full ETF Impact Report 2025-2026.
Click here for an in-depth Q&A with State Street Global Advisors' Chief Business Officer: ETFs Unfiltered: Straight Talk on the Future of Investing with Anna Paglia.
Click here for Talk of the Trade: ETF Momentum and Macro Shifts, a Q&A with State Street Global Advisors' Chief Investment Officer Michael Arone and Head of SPDR Americas Research, Matthew Bartolini.
About State Street Global Advisors ETFs in Focus Survey: Risk Management Attitudes & Behaviors
For over 30 years, State Street Global Advisors has led ETF innovation, shaping the evolution of index and active investing. The ETF Impact Series explores ETFs' evolving role in portfolio construction, risk perceptions, and investor behavior. Conducted biannually since 2022, this applied research delivers timely insights into the ETF landscape and key trends shaping portfolio decisions.
2025 ETFs in Focus: Risk Management Attitudes & Behaviors builds on this foundation with a focused look at ETFs as tools for managing risk, conducted online from January through February 2025 by State Street Global Advisors Research Center in partnership with A2Bplanning and Prodege.
Data was collected from a nationally representative sample of 500 adults 18+ with investable assets (IA) of $25,000 or more who share or are solely responsible for household financial and investment decisions. Financial Advisors: Data was collected from 200 Financial Advisors with assets under management (AUM) of $25M or more, 90% with AUM of $50M or more.
About State Street Global Advisors
For over four decades, State Street Global Advisors has served the world's governments, institutions, and financial advisors. With a rigorous, risk-aware approach built on research, analysis, and market-tested experience, and as pioneers in index and ETF investing, we are always inventing new ways to invest. As a result, we have become the world's fourth-largest asset manager* with US $4.67 trillion† under our care.
* |
Pensions & Investments Research Center, as of 12/31/23. |
† |
This figure is presented as of March 31, 2025 and includes ETF AUM of $1,553.58 billion USD of which approximately $106.42 billion USD in gold assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
1 |
Morningstar Direct, as of February 28, 2025. |
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Deborah Heindel
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