In the first quarter of 2022, a total of $26B in active manager hiring activity across 172 different products was reported by asset managers to the Investment Metrics Global Database. When comparing this figure to the first quarter of 2021, there was a 67% decrease in reported assets gained. Even though overall activity is down, it is important to note that the amount of assets going to index tracking or enhanced index strategies (passive) also decreased significantly. Index and enhanced index portfolios took only 17% of the total hiring activity in Q1 2022, compared to 25% in Q1 2021. This points to the increased demand for active managers by investors in this volatile capital market environment.
Active equity asset managers took the lion’s share of total assets gained. Typically, we have seen US large-cap equity asset managers lead the way when it comes to assets gained, but in the first quarter of this year, it was the US small/smid/mid-capitalization equity managers who benefited the most. These active managers saw over $4.3B come in across 38 different portfolios. There was also a good mix of portfolios from the three different market capitalization segments. Historically, we have seen investor preference for US small-capitalization portfolios, but this was clearly not the case this year.
Nipping at the heels of the US small-capitalization asset managers were the non-US large-cap equity asset managers with $3.9B in reported assets gained across 18 different products. The value investment style has struggled over the past decade compared to growth managers, but we have seen performance shifts favoring value managers in 2021 and into the first quarter of 2022. This may be the reason why more value investment managers are gathering assets compared to years past. Not surprisingly, US fixed income asset managers dominated the fixed income hiring activity, with over $9B in reported assets gained. US municipal bond portfolios, in particular, saw a substantial amount of activity in Q1.
Below are the top 30 asset-gathering portfolios in the first quarter of 2022. Noteworthy winners from this list include DePrince, Race & Zollo’s US Small Cap Value portfolio, which won $1.2B from a US investor for a sub-advised mandate. With this inflow, the firm doubled its assets in this strategy. Mondrian Investment Partner’s Global Fixed Income portfolio won $683M from a Japanese investor. Western Asset also gathered assets for its Global Aggregate fixed income portfolio on a sub-advised mandate from an Australian investor for $349M. William Blair won $260M for its US Small/Mid Cap Core portfolio from a European investor, also a sub-advised mandate.
In addition, there were unique portfolios that took in assets in the first quarter: Pzena Investment won $275M from a Japanese investor for its Japan Focused Value strategy. Western Asset took in $156M for its Australian Core fixed income portfolio from an Australian investor. This strategy has over $6B in total assets, which is an impressive figure for a US-based asset manager. Loomis Sayles gathered $100M from a US corporate plan for its Strategic Alpha portfolio. This unconstrained strategy combines global fixed income with derivatives to keep risk levels between 4% and 6% while trying to achieve an annualized return of 7%. Cohen & Steer won $145M for its Global Listed Infrastructure portfolio.
Indeed, despite the lower active manager hiring activity level compared to last year, we have seen very interesting developments:
1) with increased volatility in the capital markets, more active managers are getting hired compared to passive managers,
2) investors are continuing to look for active managers for alpha in the inefficient small-capitalization stocks, and
3) investors are looking for active managers who can evaluate securities globally to find alpha.
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