CAMRADATA data highlights the latest global investment trends
March 17, 2017: CAMRADATA, a leading provider of data and analysis for institutional investors, has published its latest investment research reports charting the performance of investments and asset managers in Q4 2016 across six asset classes, including Global Equity, Emerging Markets Equity, UK Equity, Diversified Growth Funds, Multi Sector Fixed Income and Emerging Markets Debt.
Over three years’ worth of data from CAMRADATA Live (its online data platform) at December 31, 2016 was analysed to produce the reports and some key investment trends emerged.
The fourth quarter saw bond valuations fall as inflationary expectations picked up and the increase in US interest rates put upward pressure on global yields.
However, most equity markets continued to perform well, particularly in the financial and energy related sectors, and the oil price recovered. US equities performed well over the quarter, with the S&P 500 Index returning 3.8%.
UK equities performed in a similar fashion, the FTSE All-Share Index returning 3.9% over the quarter, reaching an all-time high at the end of the year. European equities also performed strongly over the quarter, the FTSE World Europe (ExUK) Equity Index returning 6.0%.
Commenting on the data, Sean Thompson, Managing Director, CAMRADATA said, “US equities remained buoyant over the fourth quarter, despite uncertainty about the US presidential elections and Trump’s subsequent victory dominating the news agenda. UK and European equities all showed strong performance. In the UK, we saw that fears about the potential negative economic impact of the Britain’s decision to leave the EU have receded, with domestic growth rates exceeding expectations and consumer spending remaining resilient. However, sterling fluctuated over the period, falling sharply in early October after suggestions from the Prime Minister of a ‘hard Brexit’, but it recouped some of its losses after the Bank of England upgraded UK growth projections, and the High Court ruled parliamentary approval was required to start the EU exit process.”
Thompson points out that while Donald Trump’s proposals to boost fiscal spending were largely seen as a positive for the US economy, suggestions of increasingly protectionist trade policies have had a detrimental effect on some Emerging Markets.
Diversified growth funds
DGF products saw the lowest quarterly inflows of 2016 in Q4 2016, standing at £3.3bn across the universe. However, 2016 has the highest inflows overall for the last three years totalling £28.2bn.
Q4 2016 continued to see an increase in positive performance outcomes within the DGF universe, with nearly 68% of products achieving a breakeven or positive return.
Looking at the three-year spread of annualised returns; all bar one product achieved a breakeven or positive return. The lowest annualised return produced is -1.1% and the best performing product achieved 15.97%, giving a spread of around 17%pa between the top and bottom performer.
Whilst the UK equity universe achieved positive return in Q4, the asset class continued to see outflows with £2.8bn having been withdrawn during the quarter. In fact, the last time the UK equity universe saw a positive net inflow was in Q1 2014.
Although the UK equity universe saw negative asset flows in Q4 2016, the range of quarterly returns saw just over 90% of products achieving a breakeven or positive. The lowest quarterly return produced is -4.24% and the best performing product achieved 12.34%, giving a spread of over 16.58% between the top and bottom performer in just one quarter.
The range of annualised returns for the 3 years to December 31, 2016 saw all products achieve a breakeven or positive return. The lowest annualised return for this period is 1.28% and the best performing product achieved 12.77%.
The global equities report tells a different story. Despite growth and good returns, investors reduced their allocation in the market for the 6th quarter in a row, with outflows during Q4 totalling $1.6bn.
Q4 2016 saw a decrease in the number of managers producing a breakeven or positive return with just fewer than 50% of products achieving this; this is down from 97% in Q3 2016. The lowest return produced is -9.12% and the best performing product achieved is 11.67%.
In comparison, looking at the three-year period, 94% of managers achieved a breakeven or positive annualised return, with the range of annualised returns starting from -9.2% and the best performing product achieved 12.32%.
Emerging market equities
Q4 2016 witnessed a largely negative range of returns in the emerging market equity universe with less than 5% of managers achieving a breakeven or positive return.
Moreover, when looking over a three-year period, only 29% of managers achieved a breakeven or positive return in this asset class. The lowest return achieved was -6.93% and the highest was 15.3%, highlighting the importance of the asset manager selection process in this asset class.
Multi-sector fixed income
The Multi Sector Fixed Income (MSFI) market continued to post positive results. The Assets under Management (AuM) in the MSFI Absolute Return universe sits at just under £76bn as at December 31, 2016. In Q4 2016, MSFI Absolute Return products achieved positive inflows of just under £2.3bn across the universe.
For the second quarter running, Western Asset Management had the largest asset inflows totalling £375m, in converted sterling. BlueBay Asset Management LLP achieved the largest percentage growth, seeing its assets increase by 29.69% over the same period.
In the MSFI market, nearly 77% of products achieved a breakeven or positive return in the fourth quarter. Whilst 97% of products achieved a breakeven or positive return over a three-year period, highlighting that the MSFI Absolute Return universe continues to show positive outcomes.
Emerging market debt
The emerging market debt products also experienced negative flows across the fourth quarter, with net outflows of just under £6.7bn across the universe. This made it the sixth quarter in a row that experienced negative flows. That said, there were some asset managers who saw inflows during the quarter.
Less than 5% of products achieved a breakeven or positive return in the EMD universe this quarter whereas nearly 70% of products achieved a breakeven or positive return over a three-year period.
The lowest return reached in Q4 2016 was -7.35% and the best performing product achieved10.19%, giving a spread of just over 17.69% between the top and bottom performer.
The range of annualised returns for the 3 years to December 31, 2016 in EMD is –6.2% to 10.37%, giving a spread of 16.57% between the top and bottom performer, which highlights the importance of the asset manager selection process in this asset class.
Sean Thompson concluded, “Our investment reports provide critical data and analysis on the latest investment trends. This information is vital given the continued volatility in the markets and the fact that markets are still adapting to the new political and economic landscape in the USA. In Europe, the Brexit negotiations and elections in the Netherlands, France and Germany will also have an impact on global markets.”