Manager Intelligence and Market Trends - May 2022

IN THIS PAPER

The first quarter of 2022 ushered in a period of renewed uncertainty as investors grappled with the sobering implications of war in Europe. As geopolitical tensions rose in the wake of Russia’s invasion of Ukraine, a series of macroeconomic shifts added fuel to existing inflationary pressures, creating a major challenge for policymakers in developed markets.

Investors who expected the post-pandemic economic recovery to continue unabated had to recalibrate their expectations as growth slowed and markets turned volatile. Evidence of that adjustment was reflected in the bfinance Risk Aversion Index, which moved sharply into risk-off territory, rising from 0.50 (modestly risk averse) to 0.79 (markedly risk averse) in Q1.

As increased volatility rocked global equity and fixed income markets, investors pursued diversifying—and defensive—strategies, reducing their exposure to Eastern Europe (and divesting entirely from Russia wherever possible) and focusing new Equity search initiatives on global emerging markets (EM). In Fixed Income, investors pivoted towards assets with floating rates, such as Leveraged Loans, for better inflation protection; they also focused on higher-yielding assets, such as EM debt and High Yield bonds.

Private Markets continued to attract interest as investors sought alternatives to more traditional Equity and Fixed Income allocations: Private Debt, for example—which includes niche alternatives such as Trade Finance—accounted for 34% of new searches in Private Markets for the 12 months ended 31 March 2022. Real Estate also experienced a resurgence of investor interest during the quarter: the sector accounted for 26% of all Private Markets manager searches in the 12 months to 31st March— an 11 percentage point jump from the previous year.

Even as the prevailing market environment proved challenging, hedge funds and other liquid alternative strategies continued to perform well. In the opening months of the year, we observed a tactical recalibration as many of our clients shifted their attention away from direct investment initiatives towards multi-asset and overlay projects while still maintaining the same objectives: diversifying portfolio returns and controlling traditional risk exposures.

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.