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January 28th, 2021
By Scott Treacy, CFA
Active equity asset managers saw substantial assets gained from US institutional investors in the fourth quarter of 2020, based off preliminary Investment Metrics data (data through January 15th, 2020). Equity asset managers have seen 76% of the total US institutional assets gained in Q4, which is significantly different than what we saw in prior quarters last year. Additionally, US equity managers saw 55% of those equity assets gained and it mainly went to large-cap portfolios. The other asset class that did well was global multi-asset portfolios where two asset managers saw all of the assets gained. The multi-asset assets gained were 9% of the total in Q4 2020. AQR’s Risk Premium multi-asset portfolio saw significant assets gained along with Fidelity’s index target date and target date funds.
AQR’s Global Risk Premium – Low Volatility multi-asset portfolio had $1 billion in assets gained in the fourth quarter of 2020 from US institutional investors. This is a risk-parity portfolio which means the portfolio manager is looking to have an equal risk weighting between the four asset classes. The investment team is looking to forecast risk instead of return, which they believe is easier to forecast than returns. Interestingly, three of the top five asset gainers were asset managers that incorporate a value investment approach. This investment style has had difficulties since the US sub-prime mortgage crisis of 2008, but we’ve seen some US institutional investors make a tactical investment into value managers in Q4. Clearly, these institutional investors believe value investors will see a bounce back in performance in the future compared to what we’ve seen in the past decade in equity.
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