THE DATA BEHIND THE BUZZWORDS FOR ASSET MANAGERS

Transcription

1 THE DATA BEHIND THE BUZZWORDS FOR ASSET MANAGERS February 11, 2015 John Molesphini John Alexander, CFA

2 Today s Presentation Agenda Sales and marketing challenges Pitfalls of complex terminology Dive into data on select trends evestment s approach to measuring success

3 The Challenge of Institutional Sales: A Three Part Equation Competitive factors: - Sales ability - Longevity -Branding Macro Factors: - Asset Class Trends - Geographic Activity - Investor Herding Micro Factors: - Performance - Capacity - Characteristics

4 The Challenge of Institutional Sales: Micro Factors

5 The Challenge of Institutional Sales: Macro Factors

6 The Winds of Change are Constant The nomenclature of institutional investing is always changing. Our job as professionals is to look critically past the lingo and use discernment.

7 The Alternative Taking the terminology du jour at face value can be costly

8 Our Approach

9 So What Are Today s Definable Trends? Concentrated Equity Strategies The Search for Yield in Fixed Income Globalization of Portfolios (both Equity and Fixed) Low Volatility Equity Smart Beta/Enhanced Indexing Liability-Driven Investing Listed Infrastructure Environmental, Social, Governance (ESG) Constraints Dedicated Frontier Markets

10 Theme #1: Concentrated vs. Non-concentrated Equity Conventional Wisdom: Institutional investors increasingly prefer high active share managers who look very different from their benchmarks. Low Active Share High Active Share Stock A Stock B Stock C Stock D Stock E Stock F Stock G Stock H Stock I Stock J Stock K Stock L Stock M Stock N Stock O Stock P Stock Q Stock R Stock S Stock T non-benchmark Cash Stock A Stock B Stock C Stock D Stock E Stock F Stock G Stock H Stock I Stock J Portfolio Stock K Benchmark Stock L Stock M Stock N Stock O Stock P Stock Q Stock R Stock S Stock T non-benchmark Cash

11 Theme #1: Concentrated vs. Non-concentrated Equity Methodology: Sort select universes into concentrated and non-concentrated buckets and ascertain trends over five years Top 25% Most Concentrated Portfolios Remaining 75% Least Concentrated Portfolios Bucket #1 Bucket #2

12 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership-Global All Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

13 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership-Global Large Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

14 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership-ACWI ex-us Large Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

15 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership-US Large Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

16 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership-Canadian Large Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

17 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership--EM-All Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

18 Theme #1: Concentrated vs. Non-concentrated Equity 100% Share of Consultant Viewership-EM Large Cap 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentrated Unconcentrated

19 Theme #1: Concentrated vs. Non-concentrated Equity Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ACWI Ex-US All Cap 1.35% 0.28% -1.82% -1.67% -1.50% -0.12% 0.98% 0.75% 1.46% 2.67% 3.36% -3.30% -0.06% -0.69% 0.03% 0.43% ACWI Ex-US Large Cap 0.42% 0.75% -0.53% -0.38% -1.33% -2.73% -1.28% 0.89% 1.12% -0.78% 1.40% 2.07% 1.91% 2.97% 2.12% 0.11% Canadian All Cap -3.20% -2.36% -0.76% -0.05% 1.15% 1.02% 2.64% 1.43% 3.25% 0.81% -0.89% 0.04% 3.30% 0.67% -0.26% -0.54% Canadian Large Cap 4.53% -3.29% -0.54% -2.01% -1.49% 3.55% 9.75% -3.28% -1.77% -0.18% -2.15% -0.32% 3.70% 0.29% -2.00% 7.62% EAFE All Cap 0.38% 0.01% 0.87% 1.24% -0.17% 2.54% 0.63% 0.64% 0.80% -0.03% 0.70% -0.08% 0.25% -0.29% -1.25% -0.56% EAFE Large Cap 1.42% 1.53% 0.96% 0.58% 0.64% 0.54% 0.79% 1.03% 0.91% -0.78% 0.99% -0.97% 0.00% -0.64% 0.32% -1.13% Emerging Markets All Cap -1.98% -0.61% -1.79% -2.05% -2.75% -1.60% -1.28% -1.29% -2.03% -0.51% -0.17% -0.71% -0.06% -0.75% -0.15% -0.38% Emerging Markets Large Cap -0.90% 0.58% 1.48% 0.64% 2.78% -0.99% -0.49% 0.92% -0.72% -0.72% 1.80% -2.53% 0.01% 1.12% -0.31% -1.21% Global All Cap 0.06% -0.05% -0.32% -0.76% -0.46% 0.68% -0.16% -0.80% 0.52% 0.22% -0.55% -0.80% -0.38% -0.34% -0.31% 2.22% Global Large Cap -0.67% 1.83% 0.04% 1.54% 1.03% 1.23% 4.27% 4.32% 4.20% 2.43% 1.54% 2.10% 0.16% -0.15% 0.44% -0.89% Pan Europe All Cap 0.08% -4.57% 3.34% 0.91% -3.82% 4.84% -0.34% 3.28% 0.62% 0.76% 1.42% 2.14% 0.32% 2.20% -5.63% 2.32% Pan Europe Large Cap 2.04% 1.87% -0.35% 7.04% 0.03% -6.79% 4.52% -0.72% 0.51% 2.06% 1.12% 2.23% 0.08% -2.10% 8.96% -0.24% US All Cap -0.79% 0.40% 1.30% -1.08% 0.11% 1.78% 0.50% 0.50% 1.86% -0.48% 2.11% 1.98% 2.06% -4.75% 3.22% 1.32% US Large Cap 1.60% 0.86% 1.20% 1.64% 1.49% 0.64% 1.26% 1.58% 1.26% 1.49% 1.74% 1.66% 0.97% -1.39% 0.06% -0.34% US Micro Cap -0.63% 0.80% 2.41% 1.07% 2.21% 1.30% 2.54% 1.20% 2.27% 0.38% 3.55% 1.52% 1.96% % 3.81% 3.14% US Mid Cap -0.70% 0.73% 1.39% 1.31% 0.01% -0.18% 0.21% -0.44% -0.86% -0.13% -0.43% 0.34% -0.19% 0.25% 0.36% 0.77% US Small Cap 1.13% 0.26% 0.62% 1.11% 0.77% -0.25% 0.24% 1.06% 0.27% -0.50% 1.14% 0.93% 1.39% 0.73% 0.40% 1.39% US SMID Cap -0.67% 1.25% 1.16% 0.48% -0.17% -0.30% 2.66% 1.83% 1.74% 1.03% 1.17% 1.91% -0.34% 0.27% 2.10% -0.23% Methodology: Normalizing for universe size and product size, the % indicated in the table above represents the +/- flow benefit for being in the top quartile most concentrated strategies in the universe Application: Avg US Large Cap Equity strategy AUM =$1.3 Billion A 1.60% flow benefit in Q means the average flow for a given concentrated strategy was $21 million (1.3Bn * 1.6%) greater than a given non-concentrated strategy in that quarter

20 Theme #1: Concentrated vs. Non-concentrated Equity Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ACWI Ex-US All Cap 1.35% 0.28% -1.82% -1.67% -1.50% -0.12% 0.98% 0.75% 1.46% 2.67% 3.36% -3.30% -0.06% -0.69% 0.03% 0.43% ACWI Ex-US Large Cap 0.42% 0.75% -0.53% -0.38% -1.33% -2.73% -1.28% 0.89% 1.12% -0.78% 1.40% 2.07% 1.91% 2.97% 2.12% 0.11% Canadian All Cap -3.20% -2.36% -0.76% -0.05% 1.15% 1.02% 2.64% 1.43% 3.25% 0.81% -0.89% 0.04% 3.30% 0.67% -0.26% -0.54% Canadian Large Cap 4.53% -3.29% -0.54% -2.01% -1.49% 3.55% 9.75% -3.28% -1.77% -0.18% -2.15% -0.32% 3.70% 0.29% -2.00% 7.62% EAFE All Cap 0.38% 0.01% 0.87% 1.24% -0.17% 2.54% 0.63% 0.64% 0.80% -0.03% 0.70% -0.08% 0.25% -0.29% -1.25% -0.56% EAFE Large Cap 1.42% 1.53% 0.96% 0.58% 0.64% 0.54% 0.79% 1.03% 0.91% -0.78% 0.99% -0.97% 0.00% -0.64% 0.32% -1.13% Emerging Markets All Cap -1.98% -0.61% -1.79% -2.05% -2.75% -1.60% -1.28% -1.29% -2.03% -0.51% -0.17% -0.71% -0.06% -0.75% -0.15% -0.38% Emerging Markets Large Cap -0.90% 0.58% 1.48% 0.64% 2.78% -0.99% -0.49% 0.92% -0.72% -0.72% 1.80% -2.53% 0.01% 1.12% -0.31% -1.21% Global All Cap 0.06% -0.05% -0.32% -0.76% -0.46% 0.68% -0.16% -0.80% 0.52% 0.22% -0.55% -0.80% -0.38% -0.34% -0.31% 2.22% Global Large Cap -0.67% 1.83% 0.04% 1.54% 1.03% 1.23% 4.27% 4.32% 4.20% 2.43% 1.54% 2.10% 0.16% -0.15% 0.44% -0.89% Pan Europe All Cap 0.08% -4.57% 3.34% 0.91% -3.82% 4.84% -0.34% 3.28% 0.62% 0.76% 1.42% 2.14% 0.32% 2.20% -5.63% 2.32% Pan Europe Large Cap 2.04% 1.87% -0.35% 7.04% 0.03% -6.79% 4.52% -0.72% 0.51% 2.06% 1.12% 2.23% 0.08% -2.10% 8.96% -0.24% US All Cap -0.79% 0.40% 1.30% -1.08% 0.11% 1.78% 0.50% 0.50% 1.86% -0.48% 2.11% 1.98% 2.06% -4.75% 3.22% 1.32% US Large Cap 1.60% 0.86% 1.20% 1.64% 1.49% 0.64% 1.26% 1.58% 1.26% 1.49% 1.74% 1.66% 0.97% -1.39% 0.06% -0.34% US Micro Cap -0.63% 0.80% 2.41% 1.07% 2.21% 1.30% 2.54% 1.20% 2.27% 0.38% 3.55% 1.52% 1.96% % 3.81% 3.14% US Mid Cap -0.70% 0.73% 1.39% 1.31% 0.01% -0.18% 0.21% -0.44% -0.86% -0.13% -0.43% 0.34% -0.19% 0.25% 0.36% 0.77% US Small Cap 1.13% 0.26% 0.62% 1.11% 0.77% -0.25% 0.24% 1.06% 0.27% -0.50% 1.14% 0.93% 1.39% 0.73% 0.40% 1.39% US SMID Cap -0.67% 1.25% 1.16% 0.48% -0.17% -0.30% 2.66% 1.83% 1.74% 1.03% 1.17% 1.91% -0.34% 0.27% 2.10% -0.23% In two universes, Global All Cap and Global Emerging Markets All Cap, being more concentrated negatively impacted institutional asset flows.

21 Theme #1: Concentrated vs. Non-concentrated Equity Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ACWI Ex-US All Cap 1.35% 0.28% -1.82% -1.67% -1.50% -0.12% 0.98% 0.75% 1.46% 2.67% 3.36% -3.30% -0.06% -0.69% 0.03% 0.43% ACWI Ex-US Large Cap 0.42% 0.75% -0.53% -0.38% -1.33% -2.73% -1.28% 0.89% 1.12% -0.78% 1.40% 2.07% 1.91% 2.97% 2.12% 0.11% Canadian All Cap -3.20% -2.36% -0.76% -0.05% 1.15% 1.02% 2.64% 1.43% 3.25% 0.81% -0.89% 0.04% 3.30% 0.67% -0.26% -0.54% Canadian Large Cap 4.53% -3.29% -0.54% -2.01% -1.49% 3.55% 9.75% -3.28% -1.77% -0.18% -2.15% -0.32% 3.70% 0.29% -2.00% 7.62% EAFE All Cap 0.38% 0.01% 0.87% 1.24% -0.17% 2.54% 0.63% 0.64% 0.80% -0.03% 0.70% -0.08% 0.25% -0.29% -1.25% -0.56% EAFE Large Cap 1.42% 1.53% 0.96% 0.58% 0.64% 0.54% 0.79% 1.03% 0.91% -0.78% 0.99% -0.97% 0.00% -0.64% 0.32% -1.13% Emerging Markets All Cap -1.98% -0.61% -1.79% -2.05% -2.75% -1.60% -1.28% -1.29% -2.03% -0.51% -0.17% -0.71% -0.06% -0.75% -0.15% -0.38% Emerging Markets Large Cap -0.90% 0.58% 1.48% 0.64% 2.78% -0.99% -0.49% 0.92% -0.72% -0.72% 1.80% -2.53% 0.01% 1.12% -0.31% -1.21% Global All Cap 0.06% -0.05% -0.32% -0.76% -0.46% 0.68% -0.16% -0.80% 0.52% 0.22% -0.55% -0.80% -0.38% -0.34% -0.31% 2.22% Global Large Cap -0.67% 1.83% 0.04% 1.54% 1.03% 1.23% 4.27% 4.32% 4.20% 2.43% 1.54% 2.10% 0.16% -0.15% 0.44% -0.89% Pan Europe All Cap 0.08% -4.57% 3.34% 0.91% -3.82% 4.84% -0.34% 3.28% 0.62% 0.76% 1.42% 2.14% 0.32% 2.20% -5.63% 2.32% Pan Europe Large Cap 2.04% 1.87% -0.35% 7.04% 0.03% -6.79% 4.52% -0.72% 0.51% 2.06% 1.12% 2.23% 0.08% -2.10% 8.96% -0.24% US All Cap -0.79% 0.40% 1.30% -1.08% 0.11% 1.78% 0.50% 0.50% 1.86% -0.48% 2.11% 1.98% 2.06% -4.75% 3.22% 1.32% US Large Cap 1.60% 0.86% 1.20% 1.64% 1.49% 0.64% 1.26% 1.58% 1.26% 1.49% 1.74% 1.66% 0.97% -1.39% 0.06% -0.34% US Micro Cap -0.63% 0.80% 2.41% 1.07% 2.21% 1.30% 2.54% 1.20% 2.27% 0.38% 3.55% 1.52% 1.96% % 3.81% 3.14% US Mid Cap -0.70% 0.73% 1.39% 1.31% 0.01% -0.18% 0.21% -0.44% -0.86% -0.13% -0.43% 0.34% -0.19% 0.25% 0.36% 0.77% US Small Cap 1.13% 0.26% 0.62% 1.11% 0.77% -0.25% 0.24% 1.06% 0.27% -0.50% 1.14% 0.93% 1.39% 0.73% 0.40% 1.39% US SMID Cap -0.67% 1.25% 1.16% 0.48% -0.17% -0.30% 2.66% 1.83% 1.74% 1.03% 1.17% 1.91% -0.34% 0.27% 2.10% -0.23% In six universes, being more concentrated had a strong positive impact on institutional asset flows. In many of these universes the percentage difference in institutional flows represents an incremental flow per product of > $10 MM/quarter

22 Theme #2: The Search for Yield in Fixed Income Conventional Wisdom: As bond yields have decreased, institutional investors are turning their attention away from plain vanilla fixed income towards unconstrained, global or niche products.

23 Theme #2: The Search for Yield in Fixed Income The evestment All US Fixed Income Universe viewership has marched slowly higher over the past four years

24 Theme #2: The Search for Yield in Fixed Income But how much of the sustained interest in US Fixed Income is due to heightened interest in High Yield, Floating Rate Bank Loans and Long Duration mandates (LDI)??

25 Theme #2: The Search for Yield in Fixed Income On balance, diversified US Fixed Income consultant views dropped from 80% of total activity to roughly 56% of activity before rebounding to ~73%

26 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Theme #2: The Search for Yield in Fixed Income Interest in Global Fixed Income has grown roughly 4X since A large part of this has been the emergence of Global Unconstrained Fixed Income, making up roughly 1/3 of viewership more recently Global Fixed Income Viewership evestment All Global Fixed Income evestment Global High Yield Fixed Income evestment Global Unconstrained Fixed Income

27 Theme #2: The Search for Yield in Fixed Income Unconstrained is still very much undefined. Our data collection tells us that the industry has not figured out how best to analyze these strategies.

28 Theme #3: Specific Geography vs Global Product Demand

29 Theme #3: Specific Geography vs Global Product Demand Our Asset Flows Forecasting indicates that the trend towards globalization of portfolios will continue on its current path.

30 Theme #3: Specific Geography vs Global Product Demand For domestic equity/fixed managers, the macro trend is negative but areas of opportunity are out there. Don t ignore your global audience: 9% of interest in US Equity comes from abroad 25% of interest in UK Equity comes from abroad 11% of interest in CAD Equity comes from abroad 9% of US High Yield interest comes from abroad Get acquainted with all of the potential buyers: US Equity had net positive flows from Sov. Wealth, Union Plans and Superannuation Funds in 4Q 2014 UK Equity had net > 1 BN positive flows from Foundations and Corporate Plans in 4Q 2014

31 Theme #3: Specific Geography vs Global Product Demand For international/global/emerging managers, the macro trends are at your back. Make sure you seize your share of the market while this is the case. Seven EM Equity products command 31% of the institutional assets. If you aren t one of these firms, how does this impact you? Global Fixed Income Flows have been regionally strong in Japan and the Middle East. Are you currently marketing to these regions? Close to 4% of consultant viewership of the Global Fixed Income universe comes from Asia ex-japan evestment is forecasting roughly $12 Billion of net institutional inflows into Global TIPS/Inflation Protected Fixed Income in the coming four quarters.

32 The Challenge of Institutional Sales: A Three Part Equation Competitive factors: - Sales ability - Longevity -Branding Macro Factors: Micro Factors: - Asset Class Trends - Geographic Activity - Investor Herding -Performance -Capacity -Characteristics

33 The Challenge of Institutional Sales: A Three Part Equation Competitive factors: - Sales ability - Longevity -Branding Macro Factors: - Asset Class Trends - Geographic Activity - Investor Herding Micro Factors: -Performance -Capacity -Characteristics

34 Introducing: evestment Scorecard Our First-ever Look Into Firm-Specific Competitive Metrics Scorecard ties together all of evestment s data sources to answer critical questions regarding your business.

35 Questions? Use the Best Institutional Intelligence & Analysis