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Manager Intelligence and Market Trends
bfinance’s quarterly report in February 2019: read the team’s latest insights on institutional investor activity, risk appetite, market developments and asset manager performance across all major asset classes.
IN THIS PAPER
New manager searches show investors prioritising risk reduction and resilience. Mandates for emerging markets declined; searches for more traditional global equity and bond strategies rose; risk overlays are in vogue.
The bfinance Risk Aversion Index hit the highest level recorded since 2016. Yet, while multi asset managers have reduced their allocations to risk assets such as equities, these remain higher than historical averages.
Active global equity managers outperformed falling indices in Q4 and calendar 2018. Yet it was a weak year for the median active manager in EM equity and most major fixed income classes. Many investment grade credit managers suffered from low-duration, higher-credit risk bets while UST yields fell and spreads widened.
Hedge funds broadly struggled across all major strategies in Q4... ...as did Alternative Risk Premia managers. Yet there were bright spots among more market neutral, conservatively positioned funds.
New mandates for real assets rose to outstrip those in corporate private debt. In real estate and infrastructure we see a shift from equity towards debt, continuing the year’s more defensive tone. ESG is a key theme: >30% of searches for infrastructure equity managers resulted in the selection of a renewables-focused strategy.
Each quarter, bfinance publishes information on investor activity, key market trends and manager performance. Our quarterly snapshot of the key developments within equity, fixed income and alternative investments, including analysis of which asset manager groups performed well and which didn't.
Although “late-cycle investing” has been widely discussed since 2015, the 2018 calendar year brought a significant shift in new manager selection activity.
Although there is still a considerable amount of yield-hunting underway, the overall tone is one of increased conservatism. Mandates for emerging market equity and debt strategies have declined versus 2017; searches for traditional global equity and aggregate fixed income strategies increased; risk overlay strategies rose in popularity.
At the sub-sector level we also see a focus on resilience. In infrastructure and real estate, there
has been a modest trend from equity searches towards debt, although both areas rose in terms of mandate number and volume as investors continue to build out real asset portfolios. In “diversifying strategies” we still see an emphasis on more liquid, transparent strategies.
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This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
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