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Institutional investors added significantly and widely to fixed income strategies in Q3

Tuesday, November 24, 2020
Opalesque Industry Update - Long-only asset managers reported Q3 2020 institutional assets under management of $30.0 trillion, according to the just-released Q3 2020 eVestment Traditional Asset Flows Report. Net institutional flows totaled -$23.2 billion in the most recent quarter and -$59.9 billion over the last four quarters.

Fixed income strategies were big asset winners in Q3, with institutional investors allocating +$220.5 billion to fixed income strategies during the quarter, excluding cash and enhanced cash products. U.S. bond managers were the greatest beneficiaries, with inflows totaling +$139.4 billion for active and +$35.1 billion for passive strategies. Although most U.S. strategies saw sizeable inflows, long duration gov't/credit strategies continued to be disfavored versus short duration (-$7.6 billion versus +$21.9 billion), and bank loan managers were also left with redemptions measuring -$4.2 billion.

In this report, eVestment tracks the global distribution and movement of institutional assets across equity, fixed income and balanced/multi-asset strategies. This data is broken down by investor type and domicile, including U.S., U.K., Europe ex U.K., Australia, Japan and Asia ex Japan.

Some other key trends from the new report include:

Non-U.S. fixed income strategies saw net allocations of +$46.0 billion in Q3. Across global fixed income, investors favored broad credit-exposed strategies with strong inflows for multi-sector fixed income (+$15.6 billion) and multi-asset credit strategies (+$6.1 billion). EM debt managers also registered significant allocations, +$9.2 billion in aggregate, during the quarter.

Institutional investors redeemed -$200.3 billion from long-only equity managers in the most recent quarter. Active U.S. equity strategies accounted for -$90.4 billion in redemptions compared to -$51.3 billion for passive U.S. strategies. Active U.S. growth managers saw greater outflows than their value counterparts did for the second quarter this year (the other being Q1). However, overall, eVestment saw active core products hold up best in terms of flows.

Elsewhere in equities, active non-U.S. strategies saw outflows of -$39.5 billion versus -$19.1 billion for passive non-U.S. strategies. Contrary to the situation for U.S. equities, investors favored growth strategies over value for most geographical exposures including ACWI ex-U.S., EAFE, global, Japan and Pan-Europe equity. China focused strategies, both onshore and offshore, also continued to see net allocations.

Global multi-asset strategies posted net institutional inflows of +$0.4 billion in Q3 2020 versus outflows of -$1.1 billion for U.S. multi-asset strategies. The Q3 global multi-asset inflows, if they hold through further updates as managers continue to report assets, would represent an end to a nine-quarter streak of outflows totaling -$147.8 billion. Global tactical asset allocation (GTAA) strategies accounted for the bulk of inflows during the most recent quarter, +$6.2 billion, versus outflows of -$2.8 billion for global balanced and -$2.4 billion for diversified growth strategies. U.S. tactical asset allocation products also saw meager inflows of +$0.5 billion in Q3.

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