CAMRADATA, a leading provider of data and analysis for institutional investors, has published its investment research reports for Q2 2017, charting the performance of investments and asset managers across five asset classes – Global Equity, Emerging Markets Equity, Diversified Growth Funds, Multi Sector Fixed Income and Emerging Markets Debt.
Over three years’ worth of data from CAMRADATA Live (its online manager research platform) at 30 June 2017 was analysed to produce the reports and key investments trends emerged.
Strong corporate earnings and generally positive economic data ensured that global equity markets experienced continued growth during Q2, extending their impressive performance at the start of 2017.
US equities continued to perform well despite some mixed economic data, with the S&P 500 increasing by 3.1% over the quarter, and the Federal Reserve increasing base interest rates for the third consecutive quarter by a further 0.25% at its June meeting. The base rate now stands at 1.25%.
However, in the UK a different picture emerged. The UK equity market experienced volatility over the quarter, due to the political backdrop and the future path of monetary policy, with the FTSE All-Share generating an overall return of 1.4%. The UK political and economic landscapes remain very unsettled.
In the most recent monetary policy committee, rate-setters voted by a close 5-3 to keep rates at their current level of 0.25%, signalling to the market that interest rates may start to rise soon. Inflation rose to 2.9% in May and then dropped for the first time since October 2016
In Europe a reduction in political risk, alongside positive economic data and improved corporate earnings resulted in Eurozone equities gains. Eurozone equities increased over the quarter with the FTSE All-World (Ex-UK) index returning 2.9%. Eurozone inflation dipped slightly from 1.4% in May to 1.3% in June, but it has been widely commented that the risk of deflation is over.
Sean Thompson, Managing Director, CAMRADATA said, “Despite political uncertainty over the ability of the US administration to push through its fiscally expansive policies, US equities continued to make gains, however, the dollar weakened over the quarter in response.
“In Europe, the calmer political landscape saw Eurozone equity gains. The markets responded positively to the new pro-EU French president, Emmanuel Macron in the hope that he can push through his reform agenda reducing the risk of a Eurozone break-up.
“Emerging market equities benefited from the supportive global backdrop and outperformed developed markets, despite the threat of the Trump administration imposing significant tariffs. In the bond markets, yields were well-supported with positive returns, despite a sell-off in the last week of June.”
Thompson also points out Asia ex-Japan equities continued their strong run for 2017, with another solid quarter of gains. This follows improving Chinese economy data, and a landmark decision announced in mid-June, by index provider MSCI, that Chinese A-shares would be included in a range of its benchmark indices.
Diversified Growth Funds
Assets under management have increased by over £2.1bn since Q1 2017 and totalled £186.7bn as at 30th June 2017.
In Q2 2017, Diversified Growth Fund products saw slightly less quarterly inflows than the last quarter, standing at £856m. In fact, it is the lowest amount of inflows seen in Diversified Growth Funds during a quarter since Q3 2014.
Q2 2017 continued to see an increase in positive performance outcomes within the diversified growth funds universe, with 91% of products achieving a breakeven or positive return. The lowest quarterly return produced is -3.85% and the best performing product achieved 3.77%, giving a spread of just over 7.62% per annum between the top and bottom performer.
Looking at the three-year spread of annualised returns; all except two products achieved a breakeven or positive return. The lowest annualised return produced was 0.5% and the best performing product achieved 13.67%, giving a spread of around 14.17% per annum between the top and bottom performer.
Assets under management (AuM), in Global Equity products, totalled just under $727bn as at the end of Q2 2017, which is $43bn more than it was at Q1 2017.
The Global Equity universe continued to see outflows during Q2, making it the 8th quarter in a row that investors have reduced their allocation in Global Equities. However, some managers have seen inflows this quarter.
First Eagle Investment Management LLC took the top spot in the asset manager inflows table seeing $718m added to its AuM. Dodge & Cox was second with $678m of inflows followed by Baillie Gifford & Co., Wellington Management International Limited and Morgan Stanley Investment Management.
In Q2 2017 nearly 98% of managers produced a breakeven or positive return, nearly as good as almost 100% of products achieving this in Q1 2017. The lowest return produced was -8.38% and the best performing product achieved was 13.16%, a spread of 21.54% in return in just one quarter.
Looking at the three-year period, just over 98% of managers achieved a breakeven or positive annualised return, with the range of annualised returns starting from
-19.38% and the best performing product achieved 17.2%, a spread of 36.68% pa.
Emerging Market Equities
At the end of Q2 2017 assets under management (AuM) in Emerging Market Equity products, totalled just under $501bn and Q2 2017 saw inflows totalling $4.52bn.
In Q2 2017 nearly 99% of managers achieved positive returns in the Emerging Market Equity universe. The lowest return produced was -6.32% and the best performing product achieved was 13.85%, giving a spread of over 20.17% between the top and bottom performer in just one quarter.
When looking over a three-year period, 88% of managers achieved a breakeven or positive return in this asset class. The lowest annualised return achieved was -3.87% and the highest was 15.19%, highlighting the importance of the asset manager selection, the style and the size cap decision process in this asset class.
Multi Sector Fixed Income
The Assets under Management (‘AuM’) in the MSFI Absolute Return universe sits at just under £74.2bn as at 30th June 2017, slightly down on Q1, which was £75.6bn on 31 March 2017.
In Q2 2017, MSFI Absolute Return products achieved positive inflows of £979.4m across the universe. This was a slight reduction from the previous quarter, which saw just under £2bn of inflows.
Western Asset Management had the largest asset inflows totalling £681m, in converted sterling, during Q2 2017. They were followed by BlackRock, M&G Investments, Pictet Asset Management Ltd and Morgan Stanley Investment Management.
In the MSFI market, 88% of products achieved a breakeven or positive return in Q2. Whilst nearly 96% of products achieved a breakeven or positive return over a three- year period, highlighting that the MSFI Absolute Return universe continues to provide positive outcomes.
Emerging Market Debt
In Q2 2017 the Emerging Market Debt products saw net inflows of just over £10.88bn across the universe, the second quarter on the run to experience positive flows.
Ashmore Group had the largest asset inflows totalling $2.26bn during the quarter. It was followed by Franklin Templeton Investments, BlackRock, GAM and Neuberger Berman.
Nearly 100% of products achieved a breakeven or positive return in the EMD universe this quarter; whereas just under 73.5% of products achieved a breakeven or positive return over a three-year period.
The lowest return reached in Q2 2017 was -0.95% and the best performing product achieved 5.1%, giving a spread of just over 6.05% between the top and bottom performer.
The range of annualised returns for the 3 years to 30 June 2017 in USD EMD was
-5.05% to 8.66%, giving a spread of 13.71% between the top and bottom performer, which highlights the importance of the asset manager selection process in this asset class.
Overall, EMD products in USD have been far less volatile in their distribution of returns than the MSCI EM U$ – Total Return Index over the last 3 years. For instance, the EMD Median has achieved monthly median returns in the range of -5% to 5%, whilst the benchmark has ranged from -8% to +10%.
Sean Thompson concluded, “Our latest quarterly investment report highlights there is less volatility than expected in the USA and Eurozone; however, in the UK it’s a different story. Many of the gains made earlier in the year were undone in June as a hung parliament materialised. Looking forward the key concern for the UK is how the Brexit talks will evolve and what deal will emerge.”
“Globally, the reaction from the USA and other leading nations to the situation in North Korea is likely to impact the markets during the next quarter, along with the German election in September. Investors can stay ahead and monitor asset managers through CAMRADATA Live to ensure they make the most informed investment decisions over what could be a turbulent few months.”
EU sees no cliff-edge ending for COVID fiscal stimulus
BRUSSELS (Reuters) – European governments will not need to abruptly end fiscal support for their economies after the pandemic, top officials said on Monday, noting that any withdrawal of stimulus would be carried out gradually and only once the economy has recovered.
Euro zone public debt rose sharply during 2020 and is likely to exceed 100% of GDP this year as governments borrow to help individuals and businesses survive lockdowns.
The higher debt raises concern about how to deal with it down the road and when to start cutting it again, since the EU last year suspended its rules limiting budget deficits and debt, known as the Stability and Growth Pact (SGP).
EU finance ministers are to discuss when to reintroduce any borrowing limits in the second quarter of this year.
“I believe it important that finance ministers debate and reach a common understanding on the appropriate fiscal stance by the summer. This can then serve as guidance for the preparation of their draft budgetary plans for 2022,” the chairman of the euro zone’s group of finance ministers, Paschal Donohoe, said on Monday.
“To avoid any misunderstanding, let me stress that this is not about an imminent withdrawal of fiscal stimulus,” he told the economic committee of the European Parliament.
“We all agree that our immediate priority is to shield our citizens, in particular younger cohorts and those most exposed to the crisis. There must be no cliff-edges,” he said.
Joao Leao, the finance minister of Portugal which holds the rotating presidency of the EU and therefore sets the agenda for EU finance ministers’ work until June, was equally cautious.
“We should not withdraw stimulus too early. We need to make sure the suspension clause for the SGP remains in force at least until we return to pre-crisis economic figures,” he told the committee. “We need to make sure jobs are maintained as well as the production capacity of companies.”
He said first cash from the EU’s 750 billion euro post-COVID economic recovery programme should reach the economy in the first half of the year.
“Real funding should be getting to the economy before the summer or in early part of the summer,” he said.
(Reporting by Jan Strupczewski; Editing by Giles Elgood)
IMF to intensify focus on climate change’s economic impact, Georgieva
By Andrea Shalal
WASHINGTON (Reuters) – The International Monetary Fund views climate change as a fundamental risk to economic and financial stability, its chief said on Monday, mapping out the IMF’s plans to help focus investments in green technologies that will boost global growth.
IMF Managing Director Kristalina Georgieva told the Climate Adaptation Summit that global economic output could expand by an average 0.7% annually over the next 15 years and millions of jobs could be created if carbon prices rose steadily and investments expanded in green infrastructure.
“We see climate as a fundamental risk for economic and financial stability, and we see climate action as an opportunity to reinvigorate growth, especially after the pandemic, and to generate new green jobs,” Georgieva said.
She said the IMF was taking action in four areas to accelerate the transition to a new low-carbon and climate-resilient economy.
Georgieva said the Fund would launch a new “Climate Change Dashboard” this year to track the economic impact of climate risks and the measures taken to mitigate them, a key step to ensuring the needed shift.
“Climate resilience is a critical priority,” she said. “This is why we place it at the heart of what do, this year and (in) the years to come.”
The Fund is also integrating climate factors into its annual economic country assessments, also known as Article IV consultations, focusing on adaptation in highly vulnerable countries, and carbon pricing in its assessment of large emitters, Georgieva said.
In addition, she said the IMF is adopting enhanced stress tests and standardizing disclosure of climate-related financial stability risks in its financial-sector surveys, and expanding its training and support to help central banks and finance ministries take climate considerations into account.
The World Bank, the largest multilateral funder of climate finance, boosted funding for adaptation projects to 50% of its total climate finance over the past four years, and plans to maintain that percentage for the next five years, World Bank President David Malpass told the same event on Monday.
In addition to funding projects addressing coastal erosion, increasing crop yields and building cyclone-resistant infrastructure, the Bank was also investing in early warning and evacuation systems, better social protection, and weather observation, he said.
(Reporting by Andrea Shalal; Editing by Paul Simao)
EU may “recalibrate” climate-friendly investment guide
By Huw Jones
LONDON (Reuters) – The European Commission may recalibrate its planned “taxonomy” or guide for people that want to invest in climate-friendly assets after a huge public response, its financial services chief said on Monday.
Mairead McGuinness said the EU executive has received 46,000 replies to a public consultation on its template for fleshing out a law on taxonomy that it due to come into practical effect in 2022.
It sets out a system for classifying what activities may and many not be deemed to be sustainable in climate terms to help the shift to a low carbon economy.
“It would be useful to take a step back and to look at what the taxonomy is, and what it is not,” McGuinness told the European Parliament.
“It’s not a mandatory list of activities that investors have to invest in,” she added.
The first batch of measures to implement the taxonomy needs to be delayed given that it goes further than some existing legislation and EU policy, she said.
She said 98% of the responses to the public consultation were from citizens asking the European Commission not to break the taxonomy’s alignment with the EU’s Green Deal targets for cutting carbon emmissions.
“The Commission will consider recalibrating the technical screening criteria where serious concerns are raised, but we don’t want to break the link with science or the alignment with Green Deal targets,” McGuinness said.
The Commission has asked the Sustainable Finance platform for further input on how the taxonomy could help business with their transition to lower carbon emissions, she said.
(Reporting by Huw Jones; Editing by David Gregorio and Angus MacSwan)
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