Fund Managers Boost Spending on Stress Testing
Asset managers are prioritizing risk mitigation strategies to combat global volatility and market uncertainty.
Updated on Oct. 28, 2026 in Investing
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Eighty-eight percent of fund manager executives across the United States, Europe, and the Asia-Pacific region increased spending on stress testing over the past year. Firms are utilizing advanced scenario modeling to navigate higher volatility and reduced dealer balance sheet capacity.
Why it matters
Rising geopolitical uncertainty and shifting market liquidity are forcing firms to overhaul their risk assessment protocols. By prioritizing defensive positioning, managers aim to safeguard capital against unpredictable macroeconomic conditions.
A survey of fund managers indicates 88% have increased stress testing budgets, while 49% plan to adopt enhanced quantitative risk modeling in the next 12 months. Additional defensive strategies include 56% planning protective puts and 54% increasing allocations to defensive stocks.
The details
Asset managers are leveraging consolidated investment data to improve their scenario modeling as they grapple with diminished dealer balance sheet capacity. This shift represents a move toward more robust defensive risk management in the face of ongoing market volatility.
Timeline
Over the past year, 88% of executives increased spending on stress testing.
Over the next 12 months, asset managers plan to implement various risk mitigation strategies.
Market Dynamics
The industry's current ramp-up in stress testing and defensive risk modeling follows a pattern set by the 2008 global financial crisis liquidity crunch, aiming to avoid similar systemic vulnerabilities. This reflects a broader macroeconomic shift toward prioritizing capital preservation over aggressive growth in an era of constrained dealer capacity.
For retail investors, the industry-wide pivot toward defensive stocks and protective puts suggests a more cautious market environment that may dampen short-term returns. Investors should expect portfolio volatility to remain a primary concern as managers shift assets toward risk-averse strategies.
The takeaway
Investment firms are aggressively hardening their defenses to survive prolonged periods of geopolitical and economic instability. Retail investors may benefit from auditing their own portfolios to ensure they align with this increasingly conservative risk environment.
Further reading
For more on market risk analysis, see our coverage on Investing.
Source note: This article includes information reported by Supply and Demand Chain Executive.
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