Financial Advisors Favor "Non Traditional" Income Generating Investments, Finds OppenheimerFunds Advisor Survey

NEW YORK, July 23, 2012 /PRNewswire/ -- Financial advisors are increasingly likely to recommend less traditional income-producing assets given the current low yield environment. Favored products include emerging market bond funds and dividend-paying equities for clients, according to a survey released today by leading investment management company OppeneheimerFunds, Inc. The survey, conducted on June 20 and 21 at the 2012 Morningstar Investment Conference in Chicago, examined the investment challenges and opportunities advisors see when managing portfolios for their increasingly risk adverse clients.

Finding Income in a Low Interest Rate Environment
When asked which investments they were most likely to recommend to clients in today's low interest rate environment, nontraditional approaches to generating income dominated advisor responses. A full 84 percent of advisors are more likely today to recommend dividing-paying equities and more than three-quarters (76 percent) of advisors cited a willingness to recommend emerging market bonds or related bond funds over other asset classes.

"Ongoing market volatility, low U.S. interest rates and the many challenges surrounding retirement like rising healthcare costs and longer life expectancy, mean advisors are facing significant challenges positioning their clients' portfolios for long-term success," said Lori Heinel, OppenheimerFunds Chief Investment Strategist. "I believe the traditional asset allocation model will be unable to generate the real returns needed to sustain a quality standard of living. In addition to seeking yield,  today's investors need to look across the globe to find the best opportunities for growth while educating their clients about how certain opportunities can potentially reduce risk in their portfolios, a sentiment we see reflected in our survey data."

Seeking Emerging Market Exposure
Half (50 percent) of the advisors surveyed believe the best way to get emerging market equity exposure is through funds investing directly in emerging markets companies.  Another 26 percent of advisors are inclined to use funds that invest in companies domiciled in developed countries outside of the U.S., while 21 percent prefer funds investing in large global multi-national U.S. companies. Just three percent of respondents said they don't need emerging market equities exposure.

"We believe that emerging economies are the engines for future growth, and portfolios that are positioned to take advantage of that potential growth will likely benefit greatly," said Heinel. "There are many ways to tap global potential – whether through funds that invest in U.S. companies with significant sales opportunities in new markets or through companies based directly on the ground in countries outside the U.S. – but either way, an advisor that finds portfolio managers with a global mindset and the ability to pick good companies will find potential for greater growth."

Eurozone Crisis and U.S. Politics
Despite recognition that globalized investments are important in today's portfolios, 43 percent of respondents have reduced exposure to international bonds and 41 percent have reduced exposure to international equities since the Eurozone crisis began.

When asked to identify the most important issue impacting their financial advice to clients, 59 percent of advisors cite the ongoing European sovereign debt crisis. The U.S. presidential election was the second biggest factor, with 26 percent of respondents indicating so.

Risk Aversion and Portfolio Management
Compared to the same time period last year, 59 percent of advisors are seeing clients become more risk adverse, with increased interest in fixed income investments. Another 35 percent say risk tolerance levels are similar to what they were a year ago.

Slightly more than half  (52 percent) of the advisors surveyed agree that protecting clients from downside risk resulting from continued market volatility is their greatest challenge today. Another 19 and 18 percent, respectively, are challenged by managing clients' ongoing fears of investing in equity markets and helping clients earn real yield on their fixed income portfolios consistent with their needs.

"Sadly, clients who are sitting on the sidelines are likely to lose wealth when inflation is factored in," said Heinel. "The key is to get them to think beyond the current headlines. Many investments offer good value to long term investors."

Editor's Note
The OppenheimerFunds Financial Advisor Global Investment Survey was conducted between June 20 and 21 at the 2012 Morningstar Investment Conference in Chicago. Respondents were event attendees including Registered Investment Advisors (RIAs), Financial Advisors and other investment industry experts. The data is based on 107 respondents.

Read regular commentary from OppenheimerFund's economists and portfolio managers on http://blog.oppenheimerfunds.com/.

There is no guarantee that the issuers of stocks held by mutual funds will declare dividends in the future, or that if dividends are declared, they will remain at their current levels or increase over time. Fixed income investing entails credit risks and interest rate risks. When interest rates rise, bond prices generally fall, and the Fund's share prices can fall. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes and political and economic uncertainties. Emerging and developing market investments may be especially volatile.

About OppenheimerFunds, Inc.
OppenheimerFunds, Inc. is one of the nation's largest and most respected investment management companies. As of June 30, 2012, OppenheimerFunds, Inc., including subsidiaries, managed more than $176 billion in assets, including mutual funds having more than 11 million shareholder accounts, including sub-accounts. Known for its tagline The Right Way to Invest, OppenheimerFunds, Inc. has been helping investors reach their financial goals since 1960. The Company and its divisions and subsidiaries offer a broad range of products and services to individuals, corporations and institutions, including mutual funds, separately managed accounts, qualified retirement plans and sub-advisory investment management services.

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