Many fund managers are struggling to adjust to the new investment climate and are either selling their business or closing, according to global research centre CREATE.

While in the 1990s investors focused on the risk/return profile of investments, they are now concerned with managing uncertainty and finding safeguards against large losses, almost to the point where they are demanding absolute returns.

However, not all managers have the skill or systems in place to deliver on these demands.

"A lot of managers were not paying any attention to [this shift] as long as the money came through the door, but now money is not coming through the door and what you find in Europe is that many managers have invisible for sale signs on their doors," CREATE chief executive Amin Rajan said.

"Every week you hear of one going bust, because they really can't cope with this shift."

Rajan said in the past decade a number of changes took place in the markets that led to this shift in the industry.

"As we got into the last decade the risk/return features of all the asset classes became very unpredictable. In other words, if I was a trustee and if I invested, I didn't know what I would get. That is really quite a scary scenario," he said.

"Also [managers] believed in diversification, but only to find that the low correlation between asset classes started to rise from about 2004 onwards and went through the roof at the height of the crisis. That was another pillar of asset allocation that was demolished."

The global financial crisis raised the focus on volatility and liquidity to the point that they became separate asset classes, he said.

"What was once a noise has now become a new asset class," he said.

The increasing complexity of investment products also reduced the transparency of the process and investors found it difficult to understand how they worked.

In response to the increasing uncertainty of investment outcomes, trustees are now more concerned with managing investment liabilities. However, Rajan, who was in Sydney at the invitation of Principal Global Investors, said many managers struggled with that shift.

"This is really for houses which have deep investment capabilities; houses which have special insights in how their investments operate in today's world. This is a very changed landscape from the one that we were used to," he said.