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Q3 performance roundup: Active strategies continue rebound, equity growth outperforms value

Friday, October 30, 2020
Opalesque Industry Update - Active investment managers across a variety of asset classes and regional exposures followed their historic Q2 returns with continued gains in Q3 2020. Returns were not consistently positive throughout the quarter as losses were the norm in September. The road ahead is filled with uncertainty around US elections and the global response to COVID-19 in the coming months.

Here are some high points from eVestment's monthly and quarterly institutional investment performance data and highlights historic quarterly returns, particularly among Equity strategies, globally:

The average of all active traditional equity strategies was +7.75% in Q3 2020 (compared to +21.09% in Q2) and -0.55% YTD and the average of all active traditional non-cash fixed income strategies was +2.88% in Q3 and +3.94% YTD.

The biggest story of the quarter for equity strategies was the continued outperformance of growth over value strategies, which was almost universal across global exposures. Active equity performance vs. benchmarks shows a different picture, however, as US Large Cap and All Cap Growth managers have been finding it difficult to keep up with surging benchmarks (only 21% beat the universe's preferred benchmark in Q3 and 32% YTD).

Within fixed income, European markets generally produced better results than within the US (in USD terms) during Q3 and returns were best within convertibles, then mostly followed the credit quality spectrum with high yield strategies performing best.

Emerging market equities produced some of the best performance in Q3 2020, notably, from India (+17.61%), Korea (+17.50%) and emerging Asian markets, but it was the eVestment Nordic Equity universe with the highest average returns in Q3 (+17,74%), which was led by small cap strategies in the region.

Year-to-date through Q3, China A-Shares (+28.39%) and Offshore China Equity (+24.59%) universes are producing the highest average returns, but US Growth Equity universes are not far behind.

The average of all active traditional equity strategies was +7.75% in Q3 2020 and -0.55% YTD. The story of Q3 was twofold; there is the ongoing dominance of growth over value performance and then the differing levels of performance dispersions seen in different exposures across the globe.

Within US-focused equity strategies the difference is most muted, though it is still at a larger level than any other non-2020 quarter since Q1 2009. Removing US markets and looking at EAFE, Global EM and ACWI ex-US strategies, the differences in favor of growth equities are still near peak levels over at least the last twenty years. While differences are currently near long-term highs, growth over value has been a theme generally in place across these markets since the beginning of 2017.

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