Investment manager intelligence and market trends – recent bfinance report shines light on key 2021 trends

With supply chains stalling, inflation rising, and disruptions caused by further waves of coronavirus, the last couple of years have seen changing trends in investment. In light of this, a new bfinance report, ‘Manager Intelligence and Market Trends’, examines the effects of macroeconomic disruption on market trends in 2021, on manager intelligence and how changing market trends have affected equity markets.

Despite market disruption, equity markets ended 2021 achieving double-digit gains for the third year in a row. Global stock markets have since proved volatile as news of the Russian invasion of Ukraine has dominated investment decisions. With the potential for further disruption, investors are making sure to diversify their portfolios.

As Kathryn Saklatvala, Head of Investment Content at leading investment consultancy, bfinance, comments: “For investors looking to understand their own performance, it is extremely important to avoid relying solely on benchmarks/indices to get an accurate perspective. It is equally (and sometimes more) useful to understand how other asset managers have performed in the same asset class, and examine this in an appropriately granular way, such as against managers with the same type of strategy or style-orientation. Outperformance versus a benchmark is not particularly impressive if 80% of peers have done the same, as has been the case in certain fixed income sectors over the last quarter and year. It is also useful to understand what the main drivers of stronger or weaker performance have been in any particular asset class or sub-strategy, and apply this understanding when evaluating one’s own results.”

Investor activity – what are investors looking for?

Saklatvala goes on to comment on what insight the study has revealed into some of the detail. She said “We find it extremely informative to look at new manager searches being launched by our investor clients – particularly to see changes in terms of which asset classes and strategy types they are now seeking. Some of this activity is driven by ‘manager replacement’, which is relatively consistent although it can be stronger at times when there has been widespread disappointment with recent manager performance in a particular sector. A significant proportion of this activity, however, is driven by investors who are making more significant strategic changes, such as growing their allocations to certain asset classes/strategies or introducing new strategies to portfolios; in other words, the trends in figures can also give an indication of how investors are changing the shape and substance of portfolios.

“Analysis of new manager searches through 2021 (published in the Q1 2022 report) highlights a number of key themes including: ongoing very high demand for private markets strategies, rising appetite for short-duration or floating-rate credit strategies (e.g. Trade Finance, Receivables Finance, Leveraged Loans) amid expectations for rising interest rates, a growing focus on liquid diversification (e.g. Hedge Funds) amid more volatile equity markets, and a shift from ‘global equity’ to ‘regional equity’ searches in recognition of the regionally-differentiated macroeconomic effects of the pandemic.”

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