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Manager Intelligence and Market Trends
bfinance’s quarterly report in November 2018: read the team’s latest insights on institutional investor activity, risk appetite, market developments and asset manager performance across all major asset classes.
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IN THIS PAPER
Investors prioritise diversification and resilience. As bfinance clients grapple with late-cycle tensions, recent activity shows a strong emphasis on risk and risk mitigation. This reflected in demand for strategies that tend to do better in downturns (e.g. quality and value), alternative investments that offer low equity beta and, finally, more explicit protection arrangements such as overlays.
Multi-asset managers add equity exposure. Although other indicators of risk appetite were only mildly positive for the quarter, multi-asset managers tracked by the bfinance research team had moved to surprisingly bullish positions by the end of September.
Active managers do well in bonds, less so in equities. The median active global equity manager lagged the MSCI World, with the latter delivering strong positive performance for the quarter. Yet investment grade credit managers outperformed benchmarks in both Europe and the US, with underweight-duration and BBBheavy stances generating alpha.
Emerging markets – and emerging market managers – endure a bumpy ride. In an immensely challenging quarter for many emerging economies, both hard currency sovereign debt managers and EM equity managers (especially those with growth styles) struggled to beat their benchmarks.
Hedge fund strategies struggle. Ahead of the October rout, the average hedge fund manager delivered flat-to-negative returns in Q3 with the more directional and equitysensitive strategies struggling most.
Manager searches rise. The volume of new mandates from bfinance clients was more than 70% higher for the twelve months to September 30 2018 than the prior year. Aside from resilience, prominent themes include ESG across different strategies, real assets (debt as well as equity, listed as well as unlisted), emerging markets, fund-of-hedge-funds and an increasingly colourful multi-asset sector.
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.
The past year has seen a surge in manager selection projects handled by bfinance for a growing number of clients around the globe. The total volume of manager searches for the 12 months to September 30th has doubled versus the prior year; when we exclude overlay strategies, the figure has increased by just over 70%. The average size of manager searches for bfinance clients has also increased and now sits at around $200 million, with the median around $70 million.
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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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