FIXED INCOME SERIES Investment Research FIXED INCOME SERIES Investment Research The MSFI market deconstructed Multi Sector Fixed Income survey Q3 2018 SPONSORED BY 1 CAMRADATA.COM Editorial with rising rates. By employing a universe achieved a positive or break- CAMRADATA variety of strategies, which may include even return. This was an improvement CLEAR, INDEPENDENT ANALYSIS shorting bonds or exploiting the relative on the previous three months, in value of assets, managers of these which only 59% managed the same We provide institutional investors and funds hope to provide a positive return achievement. consultants with data and analysis to in all market conditions. assess, research and report on their This proposition has naturally proved “SOME PREDICT investments. attractive, with the result that MSFI THE US FEDERAL We are committed to fostering absolute return funds have seen a and nurturing strong, productive steady stream of investor inflows. In the RESERVE WILL relationships across the institutional third quarter of the year, these funds RAISE INTEREST investment sector and are continually gathered a net £0.3 billion, making the RATES THREE innovating new solutions to meet the INVESTORS FACE A DILEMMA. period the tenth consecutive quarter TIMES IN 2019.” industry’s complex needs. Developed market equities, led by in which this asset class, as tracked We enable pension schemes, insurers, the US, rallied in the past two years by CAMRADATA, enjoyed a positive There are challenges on the horizon, charities, family offices and consultants to record levels. Although these gains balance of investor allocations. however. Some analysts are predicting to conduct rigorous, evidence-based were good news for holders of equity Clearly, this fund type is in demand, that the US Federal Reserve will raise assessments of more than 5,000 assets, the sustained price growth which is good news for asset managers interest rates three times in 2019. investment products offered by over 700 tended to unbalance portfolios so that such as Amundi Asset Management, Although bond investors are jostling one asset managers. investors were over-allocated to stocks. which controls £12.7 billion of assets another to incorporate these anticipated Some investors have naturally been in MSFI absolute return funds, making rises into current bond prices, market The CAMRADATA Multi Sector Fixed inclined to rebalance their portfolios it the largest player in this fund class, as volatility will inevitably attend the actual Income Survey is based on all up-to- towards safer assets, namely bonds; the tracked by CAMRADATA. BlackRock, announcements. Such turmoil may date sterling Multi Sector Fixed Income conundrum is that interest rates have Western Asset Management, Insight offer a chance for managers of MSFI vehicles in CAMRADATA Live four weeks been rising steadily, eroding the value of Investment Management and Manulife absolute return funds to prove their after the end of the report quarter. conventional fixed income. Asset Management make up the rest of worth, but it could also spell drama and Multi asset fixed income (MSFI) the top five by market share. disappointment for those managers absolute return funds are designed to In terms of performance, MSFI who misjudge their investments. provide a solution. The idea is that they absolute return funds can boast an will offer exposure to the bond market upturn in the third quarter, when George Mitton, while minimising the risks associated 84% of products in the CAMRADATA Research editor, CAMRADATA To discuss your requirements +44 (0)20 3327 5600 / [email protected] / Find us at camradata.com / Join us on LinkedIn / Follow us on Twitter @camradata 2 CAMRADATA.COM Sharing insights from our global fixed income study The Invesco Global Fixed Income Study explores key trends within the asset class through the views, opinions and experiences of 79 leading fixed income specialists worldwide. Available to download now: www.invesco.co.uk/institutional This advertisement is for Professional Clients in the UK only. This is not for consumer use. Issued by the UK by Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority. 63643 Invesco_Global Fixed Income_A5 advert_L.indd 1 29/06/2018 15:41 Investment views: 2018 outlook OUTLOOK volatility. Other major markets had causing some to question its status The third quarter had the feel of it worse - the Eurostoxx 50 and the as a “safe haven” asset. a gathering storm. Although key FTSE 100 were down considerably indicators such as the US stock compared with the start of the year, UNITED STATES market continued a consistent while the Shanghai Composite Index After a booming second quarter, in ascent, the media frothed with resembled the path of a marble which the US economy expanded at reports of a developing trade war falling down a long flight of stairs. an annualised rate of more than 4%, between the US and China. The With so much uncertainty ahead, the pace of growth slowed to 3.5% in dollar strengthened against emerging many investors are withdrawing from market currencies, putting pressure equities or being highly selective in “THE STORM BROKE on borrowers in these markets. their choice of stocks. Analysts warned that equity growth IN OCTOBER WITH A was unsustainable and a correction BONDS MARKET ROUT THAT was on the horizon. Fixed income instruments failed to STRIPPED VALUE Sure enough, the storm broke provide much protection against the FROM EQUITIES in October with a market rout that stock market losses, which is not AND BONDS ALIKE.” stripped value from equities and surprising given that central banks bonds alike. Although economic such as the US Federal Reserve the three months ending September growth in most major markets have been raising interest rates, 30. There were some concerns over remains strong, investors are opting which tends to push down bond consumer spending and exports, for a more cautious positioning prices. Outflows from conventional which were both recorded to below as they look ahead to 2019. fixed income funds underline the expected levels; however, corporate Defensive stocks are being chosen tough conditions for bond holders. spending on inventory and equipment in preference to growth stocks On the hopeful side, the prospect exceeded expectations. The and many portfolio managers are that the Fed will pause rate rises slowdown is not considered a reason increasing their holdings of cash. has encouraged some analysts to sell US-listed assets as the country to predict a turning point for fixed is still on track to meet its growth 19-country grouping achieved growth that they are compelling investment economic boom in July. Investors EQUITIES income in 2019. target of 3% for the full year. of 1.7% - a level that trails the US targets for investors with a high are nevertheless advised to exercise While the third quarter brought by some margin but is generally felt risk tolerance. caution on this market because consistent gains in indices such as OTHER ASSETS EUROPE to be satisfactory. Among the 28 economists expect the growth rate the S&P 500, bringing the measure Gold rallied only slightly in response Growth in the euro area matched countries that make up the larger UK to fall again in the final quarter to new heights, the beginning of to stock market volatility. The price of the level seen in the second bloc of the European Union, Poland, The British economy achieved its of the year. Arrangements for the the fourth quarter brought a sharp the precious metal is still far below quarter, when the regional economy Romania and Latvia outperformed in highest growth rate since 2016 in UK’s exit from the European Union correction followed by significant the level seen at the start of the year, expanded by 0.2%. Year-on-year, the terms of growth, perhaps indicating the third quarter thanks to a brief remain uncertain. 4 CAMRADATA.COM Highlights MSFI Absolute According to the NATIXIS INVESTMENT MANAGERS return vehicles in CAMRADATA IQ THE NUMBER again achieved the largest asset inflows, with inflows totalling £1,015m, in converted sterling, during Q3 2018. They were GBP saw Insight Investment Management hold the Scores... in this survey OF MSFIs followed by Payden & Rygel, Aviva Investors, PGIM Fixed Income and largest market share with £6.1bn at the end of now stands at 74 products. Almost Insight Investment Management. Q3 2018. • for the 3 years to 30th September 2018, the top 95% of these products have more ranked manager in the GBP universe, with an IQ than three years’ worth of returns, EUR also saw Insight Investment Management Score of 0.79, is M&G with their M&G Alpha whereas there are no products with a SINCE Q2 2018 MSFI hold the largest market share with €6.4bn at the Opportunities Fund. Other standout GBP products track record of less than one year. absolute return assets have decreased by just under... end of Q3 2018. are from TwentyFour Asset Management and Payden & Rygel. USD saw Western Asset Management hold the largest market share with $13.5bn at the end • In the EUR universe M&G is also the top 80.96% of Q3 2018. manager with an IQ Score of 0.81, followed by La £0.5BN Française and NN investment Partners. • In the USD universe PGIM Fixed Income is the top The third quarter of 2018 saw an increase LOGAN CIRCLE manager with an IQ Score of 0.83 for their of positive performance with 84% of products Achieved the largest percentage growth, seeing PGIM Absolute Return Bond Fund. Other achieving a breakeven or positive return, their assets increase by 80.96% during Q3 2018, standout USD products are from Nomura Asset followed by Payden & Rygel, Natixis, PGIM Fixed compared to 59% in Q2 2018.