Manager Intelligence and Market Trends - August 2023

IN THIS PAPER

Confidence crept upwards in Q2 2023, with a marked improvement in the bfinance Risk Aversion Index (following its Q1 spike), but allocations to risk assets among multi-asset managers are still sitting a little under the ten-year average – illustrating the ongoing caution of market participants. Risk awareness is also visible from the ongoing surge in asset owner demand for overlays, as shown by activity in both the ‘Portfolio Design’ and ‘Diversifying Strategies’ divisions.

The second quarter proved to be a mixed bag for active managers on a relative performance basis. Particularly strong results were delivered by emerging market equity and debt managers (especially local currency fixed income), growth-oriented equity strategies and ‘Macro and Trading’ hedge fund strategies (Global Macro, CTAs and the like). Yet low volatility, income and value-oriented equity managers struggled, as did the high yield bond contingent.

New manager search activity from institutional investor clients showcased the evolution of asset owner sentiment, with a focus on portfolio ‘basics’ illustrated by large new mandates in (global, developed market) equities, an upward trend in (investment grade) fixed income manager searches and weak appetite for hedge funds.

That being said, more than half of new bfinance manager searches (53%) still targeted private market strategies. This figure represents a decline against the prior year (58%), but not a substantial one. Industry-wide fundraising data, meanwhile, showed private market capital raising at its lowest level since the quarter that immediately followed the outbreak of the Covid-19 pandemic.

In Portfolio Design, investors continued to grapple with the conundrum of diversification after a difficult 2022, but clients have also been addressing the risk of ‘over-diversification’. This is visible in efforts to streamline the asset manager roster. Such simplification can reduce excess costs and clarify appropriate exposures.

Rising costs continue to be a matter of ongoing concern and discussion, as illustrated by a June 2022 bfinance Asset Owner Survey (Investors’Costs and Fees).

WHY DOWNLOAD?

Each quarter, bfinance publishes information on investor activity, key market trends and manager performance. A 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.