Manager Intelligence and Market Trends - May 2024

IN THIS PAPER

As investors continue down the path of strategic re-alignment in a new macroeconomic era, we have witnessed a significant increase in demand for equity managers: new mandates targeting this asset class surged, accounting for 33% of all manager searches by bfinance clients in the 12 months to March 31st 2024, up from 17% for the previous year (p.4). Active managers broadly struggled to outperform benchmarks Q1, although High Growth and Growth styles delivered strong relative returns as big tech stocks further increase their dominance within major indices.

Asset manager performance was particularly strong in Investment Grade Credit, with 91% of US and 82% of Euro managers beating their benchmark net of fees. Exposure to credit risk was a significant driver – a theme discussed over a longer time horizon in a recent white paper (Investment Grade Corporate Bonds: Understanding Manager Performance). Investment Grade Bonds also continue to draw outsized manager search activity among bfinance clients.

Conversely, new manager searches for private market asset classes dipped to 43% of all bfinance client mandates for the 12 months to March 31st – still a very strong figure, but below the all-time peak of 58% for the previous year. The decline was particularly visible for searches targeting the infrastructure asset class (p.27).

The bfinance Risk Aversion Index has confidently moved into bullish territory, sitting at or below 0.3 for most of Q1 versus a one-year average of 0.4+ and a ten-year average of 0.5+. Healthy risk appetite is also evident in equity search activity (above) and the positioning of Multi-Asset funds, which have upped equity exposures in the last three months.

‘Diversifying Strategies’ (liquid strategies) accounted for 11% of all mandates from bfinance clients and 10% the previous year (p.4). That being said, the continuity masks a doubling of demand for more diversifying Hedge Fund strategies versus Multi-Asset (p.23). Hedge Fund managers also continued to deliver healthy returns in Q1. The outstanding performance of Alternative Risk Premia strategies, up 6.8% in Q1 (p.24), deserves particular attention within the Diversifying Strategies cohort. This continues ARP’s very consistent positive run through the diverse market conditions of 2021-2024: over the past fifteen quarters, ARP strategies have only delivered a loss in one. After the sector’s difficulties in 2019-20, which produced a dramatic cooling of allocator sentiment, subsequent robust results may re-ignite investors’ interest.

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.