While registered investment advisors (RIAs) are divided as to whether or not they plan to add international bonds or stocks to client portfolios over the next 12 months, they overwhelmingly prefer to use actively managed funds to gain exposure to international markets, according to a survey of RIAs and other investment industry experts conducted by Aberdeen Asset Management.

The Aberdeen Asset Management RIA Survey found that six in ten RIAs plan to increase their allocation to international equities over the next year.  When it comes to international fixed income, 51 percent responded that they expect to add international bond exposure with the remainder not planning to add international bonds to client portfolios. 

"It is no secret that U.S. investor portfolios are generally underweight in international equities and fixed income," said Mickey Janvier, Head of Wealth Management, Aberdeen.  "The risk of being overexposed to any one market is too great for investors planning for retirement and other long-term financial goals.  While advisors remain divided on whether or not to increase exposure to international markets in the coming 12 months, we believe that over the long-term international bonds and stocks should be broadly owned by American investors seeking to diversify and grow their portfolios."

When investing internationally on behalf of their clients, the survey showed that RIAs overwhelmingly prefer to use actively managed funds.  More than three in four (76 percent) are most likely to use actively managed funds to invest outside the U.S., compared to 17 percent that plan to use ETFs and 4 percent that expect to use passive index funds. 

"When investing outside the U.S., there is no substitute for the on-the-ground research capabilities that active managers bring to the table," says Janvier. "Investing in a broad index provides exposure to a broad swath of issuers and companies, not all of which are worth investing in.  The value of active management is the ability to sift through the myriad investment opportunities throughout the world to identify those with the greatest risk-reward potential."