Global uncertainty and higher interest rates are pushing fund selectors towards active strategies, with allocations expected to increase next year, according to research from UK-based Rathbones Asset Management.

The study, covering independent financial advisers, discretionary fund managers and private bank fund selectors managing around £234 billion for retail clients, found that 53% of respondents are seriously moving towards active strategies while maintaining core equity exposures. Around 18% said they are shifting towards defensive and tangible assets and 29% moving into cash and short-duration bonds.

Active management is attracting fund selectors because it can help them target sectors benefiting from geopolitical developments, including defence and cyber security, while avoiding companies with supply chains particularly exposed to global uncertainty, according to Rathbones.

Higher interest rates and greater dispersion between successful and struggling companies are also supporting the shift. Some 57% of respondents said these factors had made them favourable towards active strategies, while 39% said they had become slightly more favourable towards passive approaches.

95% of respondents anticipate an increase in their allocation to active strategies next year. Of those, 13% expect a significant increase.

Active-only approaches were most prevalent in emerging market equities, corporate bonds and high yield debt, with 42% of respondents using only active strategies in these asset classes. The same proportion used active-only strategies for developed-market large-cap equities, although 43% were passive-only in this area.

Around 99% of respondents said they are worried that passive growth trackers are overexposed to companies with stretched valuations. 91% agreed that some markets, including small caps and emerging market debt, are unsuitable for passive indexing.

Fund selectors were least likely to rely exclusively on active management for government bonds, gilts and Treasuries, while commodities had the highest use of passive-only strategies.