Asset Flows Report June 7, Summary evestment s Traditional Asset Flows Report shows the flow of institutional funds across investment strategies, regions, and investor types. Investor flows are calculated based on a bottomup approach, measured for each product and summarized at the universe and asset class levels. The universes utilized in this report are identical to those that exist on the evestment platform. Highlights Institutional investor flows were positive to start the year with aggregate net allocations of $9.1 billion to long only strategies in Q1. fixed income strategies led the way for flows. Net institutional allocations contributed $72.8 billion during the quarter. institutional flows were positive for passive and passive non- equity strategies at $42.0 billion and $11.1 billion, respectively.
Executive Summary Asset managers reported long only institutional assets under management of $24.9 trillion to evestment at the end of. Institutional investor flows were positive to start the year with aggregate net allocations of $9.1 billion; flows for the past four quarters were still negative measuring $309.8 billion. fixed income strategies led the way for flows with institutional investors contributing $72.8 billion during the quarter and $206.1 billion over the past four quarters. Investors across a variety of types and domiciles were net allocators to fixed income managers in. Furthermore, with the exception of outflows from high yield and mortgage products, the segment saw inflows across the full range of strategies. fixed income managers also experienced a strong quarter of inflows, attracting $32.3 billion in flows, concentrated largely in global aggregate, credit, and unconstrained strategies. On the other end of the spectrum, was largely net negative for country-specific and regional equity managers, among them,, pe ex-, and Asia-Pacific strategies. equity managers continued to experience elevated outflows including $45.4 billion during the most recent quarter. Passive equity strategies were insulated from the redemptions with inflows of $42.0 billion. Assessed on market capitalization, all cap and large cap strategies are seeing the most outflows, while on the style front, growth strategies are being disinvested by institutional investors at a faster rate than value strategies, particularly in equities. Within the greater current of outflows from equity strategies, institutional investors preference for value over growth has been playing out gradually over the past three to four quarters. Similarly, underlying outsized institutional demand for and global fixed income strategies is the weakening support for high yield strategies in these regions, and for corporate fixed income in other markets. Large scale shifts in institutional preferences take time to coalesce and if sentiment for equity style or credit exposure are truly changing, we are likely in the early innings. 2
Trends Net institutional investor flows by investment region and asset class as a percentage of prior period institutional AUM Canada Equity -1.8% 0.5% -0.8% Fixed Income 0.3% -1.6% 1.9% Equity -3.9% -9.9% -2.8% Fixed Income -8.7% 3.6% 0.9% Japan Equity -2.7% -8.9% 0.2% Fixed Income -11.4% 9.4% -3.5% Equity -5.2% -5.5% -0.7% Fixed Income -1.0% 2.5% 1.0% Multi-Asset -0.8% -1.6% 0.3% pe ex- Equity 2.3% -8.3% -4.1% Fixed Income 8.6% 4.9% 0.3% Asia-Pacific ex- Japan Equity -9.9% -8.8% -5.3% Fixed Income 10.0% 9.7% -0.3% Australia Equity -2.2% -5.2% -0.6% Fixed Income -3.2% -6.0% 0.7% Emerging Markets Equity -2.1% 1.0% -0.3% Fixed Income -7.3% -3.4% -0.4% Equity -1.9% -2.8% -0.4% Fixed Income 0.9% -2.5% 2.4% Multi-Asset 3.4% -8.0% -2.1% International EAFE Equity 1.1% -0.2% -1.0% ACWI ex-us EQ 3.9% 0.9% 0.0% 3
Active vs. Passive: and Non- Equity Strategies net institutional flows were positive for passive and non- equity strategies at $42.0 billion and $11.1 billion, respectively. Active equity strategies continued to see net outflows in aggregate net redemptions totaled $142.7 billion across both and non- strategies. Over the past three years, institutional assets allocated to passive equities have increased 38.76%. Active equity strategy AUM has remained relatively stagnant over the same period, increasing 7.82% for products and 1.63% for non- products. Cumulative net institutional investor flows (USD BN) $200 $0 ($200) ($400) ($600) ($800) ($1,000) ($1,200) ($1,400) $84 ($20) ($317) ($861) Active Equity Active Non- Equity Passive Equity Passive Non- Equity $16,000 Institutional assets under management (USD BN) $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 $3,860 $3,848 $3,909 $3,662 $3,600 $3,664 $3,776 $3,599 $3,554 $3,513 $3,498 $3,534 $5,005 $4,905 $4,752 $4,818 $5,072 $4,500 $4,700 $4,520 $4,560 $4,692 $4,580 $4,754 $2,317 $2,458 $2,542 $2,763 $2,743 $2,479 $2,716 $2,744 $2,716 $2,864 $3,090 $3,235 $1,422 $1,553 $1,837 $1,934 $1,883 $1,670 $1,716 $1,786 $1,812 $1,924 $1,839 $1,594 Active Equity Active Non- Equity Passive Equity Passive Non- Equity 4
Active vs. Passive: and Non- Fixed Income Strategies fixed income strategies saw continued support from investors in with active managers gaining net allocations of $52.7 billion and passive products gaining $20.1 billion during the quarter. Passive fixed income strategies now extend their quarterly net inflows streak to five quarters for a total of $88.4 billion in net allocations. Results were more mixed for non- strategies; net flows were +$46.8 billion for active non- and -$0.1 billion for passive non- $400 Cumulative net institutional investor flows (USD BN) $300 $200 $100 $0 ($100) ($200) ($300) $106 $140 $31 ($84) Active Fixed Income Active Non- Fixed Income Passive Fixed Income Passive Non- Fixed Income $12,000 $10,000 Institutional assets under management (USD BN) Active Fixed Income $8,000 $6,000 $4,000 $5,821 $5,820 $5,936 $5,892 $5,864 $5,849 $5,792 $5,870 $6,199 $6,446 $6,392 $6,275 Active Non- Fixed Income Passive Fixed Income $2,000 $0 $3,108 $3,097 $3,235 $3,120 $3,214 $3,202 $3,076 $3,337 $3,187 $3,565 $3,342 $2,894 $471 $467 $528 $456 $506 $509 $593 $636 $660 $586 $718 $743 $408 $409 $420 $419 $387 $432 $378 $409 $416 $452 $426 $277 Passive Non- Fixed Income Note: Non- active and passive fixed income reporting for asset data is currently less robust compared to Q4. We recommend reviewing updates of the data published on our Asset Flows platform. 5
Asset Class Flows: Equity Strategies Net institutional investor flows as % of prior period institutional AUM for select equity universes; Positive figures in bold, negative figures in italics 2013 2014 Qrtrs Q2 Q3 Q4 10.44% 3.00% ACWI ex- All 4.29% 0.48% -0.84% 1.56% EM All 0.68% 0.21% ACWI ex- All 0.29% 5.38% All 1.05% 2.30% ACWI ex- All -1.11% ACWI ex- All -1.29% ACWI ex- All -0.43% 0.13% ACWI ex- All 0.03% 0.19% EM All 4.38% 0.92% Large -1.60% EM All -2.16% EM All -2.01% -0.64% Large -0.44% EM All -0.59% All -0.43% Large 2.55% All 0.39% -1.78% Large -2.17% -3.82% All -0.76% ACWI ex- All -1.10% -0.71% -0.62% ACWI ex- All -0.64% EM All 0.28% -2.21% All -4.53% Large -3.97% Large -0.92% -1.12% -1.45% -0.77% All -1.49% Large 0.20% -2.73% -5.17% All -4.53% -1.09% All -1.28% Large -1.46% EM All -0.93% All -2.99% -0.68% All -3.29% Small -5.51% Small -7.09% EM All -1.14% Small -1.53% All -1.97% Large -1.07% -3.97% ACWI ex- All -0.90% EM All -3.60% -5.61% -8.90% -1.19% -2.10% Small -2.13% Small -1.61% -4.66% -4.59% -3.79% -8.30% -9.30% Small -1.28% Large -2.78% -2.27% All -2.82% -7.16% Large -5.98% All -3.93% -8.95% -9.44% All -1.82% -3.08% All -3.21% -2.83% Small -7.83% -7.66% Small -5.92% All -9.94% All -10.31% Large -2.42% -3.15% Large -3.45% Large -2.89% Large -9.74% Small -10.80% Large -8.68% Large -9.97% Large -11.71% -3.60% All -3.52% -5.09% -4.05% 6
Asset Class Flows: Fixed Income Strategies Net institutional investor flows as % of prior period institutional AUM for select fixed income universes; Positive figures in bold, negative figures in italics 2013 2014 Qrtrs Q2 Q3 Q4 Unconstrained 45.32% Unconstrained 13.59% Unconstrained 9.59% 9.45% 10.21% 5.17% 11.39% Long 1.88% 3.31% Credit 14.35% 7.46% 8.73% 4.88% 5.24% 2.21% 4.24% Credit 0.89% Credit 2.95% Long 11.11% Core 5.60% Credit 4.07% High 4.74% Credit 4.44% 0.87% 2.43% High 0.71% Unconstrained 2.28% 3.12% Credit 5.21% 3.34% 4.03% 3.77% 0.64% 2.09% 0.37% 1.23% 2.47% 0.40% Long -0.79% Credit 2.95% 2.70% High 0.54% Credit 1.92% 0.35% 0.80% High 1.84% -0.61% High -1.19% 0.92% High 2.57% 0.31% High 1.83% Core 0.35% Long 0.78% 0.12% Long -4.87% Core -2.32% Core 0.12% Core 1.07% -0.84% Core 1.58% Unconstrained 0.34% Core 0.32% -1.01% High -4.90% -3.51% -0.24% Unconstrained 0.34% Long -0.89% 1.05% 0.10% 0.10% Core -3.53% -5.90% -6.13% -1.91% Long 0.00% Core -1.16% Unconstrained 0.11% -1.75% -0.02% -4.71% -6.69% -6.96% Long -2.73% -0.27% Credit -1.20% -1.23% -2.08% High -0.66% -6.58% -10.17% -11.36% Unconstrained -3.36% -1.04% -1.41% -1.77% -2.53% -1.25% -8.07% -13.29% -11.52% -7.42% -2.92% Unconstrained -2.33% Long -1.78% -3.49% -3.52% 7
Flows by Investor Domicile: domiciled investors were net allocators to fixed income and emerging markets fixed income strategies over the past year with inflows of $125.0 billion and $5.8 billion, respectively. Managers reported investor AUM of $6.94 trillion in fixed income and $190.2 billion in emerging markets fixed income at the end of the quarter. investors did not provide net inflows to any broad regional equity strategies in the past year, with the exception of minor allocations of less than $0.4 billion to and Canadian managers. domiciled investor flows (last 4 quarter investor flows as % of Q1 investor AUM; flows as % of Q4 investor AUM) Emerging Markets Equity -0.6% -0.5% Fixed Income 3.6% 2.6% Investor Domicile (Source of Assets) Equity -6.6% -1.7% Fixed Income -2.5% 0.7% Equity -6.2% -1.2% Fixed Income 1.9% 0.7% International ACWI ex-us EQ -3.7% -0.1% EAFE Equity -3.1% -0.9% *All calculations in the Flows by Investor Domicile section are based on total flows and total assets under management, in contrast to the remainder of the report which utilizes institutional flow and institutional AUM figures. Certain products provide total AUM but do not provide investor domicile asset breakdowns. 8
Flows by Investor Domicile: Managers reported $1.28 trillion in domiciled investor assets, up from $1.20 trillion at the end of. Across the universes to which investors have large exposures, net flows were generally negative during the prior four quarters. Emerging markets were particularly out of favor with net investor flows of -$5.1 billion for EM equity and -$3.3 billion for EM fixed income. The only exceptions to the aggregate redemption trend were fixed income managers who saw $18.0 billion in net allocations from investors during the last four quarters. domiciled investor flows (last 4 quarter investor flows as % of Q1 investor AUM; flows as % of Q4 investor AUM) Emerging Markets Equity -10.6% 0.1% Fixed Income -14.2% -8.2% Investor Domicile (Source of Assets) Equity -9.4% -1.7% Fixed Income -3.7% 0.4% Equity -6.3% -2.3% Fixed Income 8.7% 1.6% Equity -8.4% -2.6% Fixed Income -1.5% -1.4% *All calculations in the Flows by Investor Domicile section are based on total flows and total assets under management, in contrast to the remainder of the report which utilizes institutional flow and institutional AUM figures. Certain products provide total AUM but do not provide investor domicile asset breakdowns. 9
Flows by Investor Domicile: pe ex- Reported pe ex- domiciled AUM stood at $3.14 trillion at the end of. Over the past four quarters pe ex- investors added to fixed income strategies and withdrew assets from pe,, and emerging markets equity strategies. Net redemptions from pe equity strategies were substantial, measuring $28.4 billion for the year similarly large, net outflows from equity strategies were $23.1 billion. On the other hand, pean investors were net allocators to pe fixed income ($22.3 billion) and fixed income strategies ($27.8 billion). pe ex- domiciled investor flows (last 4 quarter pe ex- investor flows as % of Q1 pe ex- investor AUM; pe ex- flows as % of Q4 pe ex- investor AUM) *Strategies with pe as the investment geography INCLUDE zone, Pan-pean, and pe ex- country-specific strategies and EXCLUDE -specific strategies Emerging Markets Equity -2.0% -4.2% Fixed Income 5.0% 1.6% Investor Domicile (Source of Assets) Equity 3.8% 2.5% Fixed Income -1.5% 3.3% pe Equity -13.0% -4.2% Fixed Income 4.4% 0.8% Equity -14.0% -4.4% Fixed Income 7.4% 1.9% *All calculations in the Flows by Investor Domicile section are based on total flows and total assets under management, in contrast to the remainder of the report which utilizes institutional flow and institutional AUM figures. Certain products provide total AUM but do not provide investor domicile asset breakdowns. 10
Company Description evestment provides a flexible suite of easy-to-use, cloud-based solutions to help global investors and their consultants select investment managers, enable asset managers to successfully market their funds worldwide and assist clients to identify and capitalize on global investment trends. With the largest, most comprehensive global database of traditional and alternative strategies, delivered through leading-edge technology and backed by fantastic client service, evestment helps its clients be more strategic, efficient and informed. For more evestment research visit: www.evestment.com/resources/research-reports Locations Atlanta (Headquarters) support@evestment.com +1 (877) 769 2388 New York support@evestment.com +1 (212) 661 6050 Edinburgh europe@evestment.com +44 (0) 131 564 0736 London europe@evestment.com +44 (0) 20 7651 0800 Sydney australia@evestment.com +61 (0) 2 8211 2717 Hong Kong asia@evestment.com +852 2293 2390 Dubai support@evestment.com +971 561380679 Research Group Peter Laurelli, CFA Head of Research plaurelli@evestment.com +1 (212) 230 2216 Minkyu Mike Cho, CFA Senior Research Analyst mcho@evestment.com +1 (212) 230 2209 Tony Kristić Senior Research Analyst tkristic@evestment.com +1 (646) 747 7166 Media Contacts Mark Scott Communications mscott@evestment.com +1 (678) 238 0761 Jamie Letica Cognito (US) jamie.letica@cognitomedia.com +1 (646) 395 6305 Francesca Bliss Cognito (UK) francesca.bliss@cognitomedia.com +44 (0) 20 7426 9419 Natalie Chan Ryan Communication (Asia) natalie@ryancommunications.com +852 3655 0539 evestment Alliance, LLC All Rights Reserved 11