Investors continue to divert flows from equity strategies into fixed income

Flows

Institutional investors allocated USD220.5 billion to fixed income strategies in the third quarter of 2020, with most of this going toward US bond managers, as rising coronavirus cases and the run-up to the US election kept appetites for risk low.

Inflows to US fixed income totalled USD139.4 billion for active and USD35.1 billion for passive, according to the latest eVestment Traditional Asset Flows report. 

Institutional investors redeemed USD200.3 billion from long-only equity managers in the same period, almost half of which came from active US equity strategies. 

Redemptions of USD90.4 came from active US equity funds, with growth managers making up the bulk of the outflows. A further USD51.3 billion was withdrawn from passive US strategies.

“Flows were broadly net negative for active US equity managers in Q3 2020. Active large cap strategies accounted for roughly 62 per cent of institutional redemptions during the quarter, -USD54.1 billion, followed by -USD13 billion from mid cap strategies,” says Peter Laurelli, global head of research at eVestment.

Elsewhere in equities, active non-US strategies saw outflows of USD39.5 billion versus USD19.1 billion for passive non-US. Here, investors favoured growth strategies over value for most geographical exposures including ACWI exU.S., EAFE, global, Japan, and Pan-Europe equity. China-focused strategies, both onshore and offshore, also continued to see net allocations. 

Fixed income strategies were in favour with investors across the board, including global fixed income, which garnered net allocations of USD46 billion. Inflows of USD15.6 billion were seen in multi-sector fixed income, and USD6.1 billion went towards multi-asset credit strategies. 

Emerging markets debt managers also registered significant allocations of USD9.2 billion in aggregate, during the quarter. 

Overall, institutional investors were responsible for net outflows, totalling USD23.2 billion of redemptions in the third quarter, with outflows hitting reaching USD59.9 billion over the last four quarters. 

Long-only asset managers reported third quarter institutional assets under management of USD3 trillion to eVestment.