Elevated equity market valuations and potentially rising bond yields suggest the return environment for traditional risk assets could be difficult. Faced with this challenge, institutional investors are seeking alternative sources of return. Alternative risk premia strategies—which harvest well-established risk premia and market anomalies across asset classes—may fit the bill.
This publication presents manager performance for 37 asset classes and substrategies, showing the median, mean, and key percentiles of return. Relevant indexes for each asset class are also included to provide market context.
Second quarter 2019 saw most major global equity markets continue their recovery from the sharp fourth quarter 2018 market correction, with the S&P 500 Index reaching record highs in late June.
Fixed income assets and gold advanced, as escalating trade tensions cast uncertainty regarding the global growth outlook and global central banks sounded a more dovish tone; equities and other real assets were more mixed. This chart book presents returns and other market metrics for fiscal year 2019.
The median US Mid-Cap Growth Equity manager posted the highest median return for first quarter 2019, returning 19.3%. For the one-year period ending March 31, 2019, the median US Real Estate Investment Trust manager posted the best return (18.8%).
In this quarter’s edition, our focus continues to be on fundamental equity long/short managers, but now from an internal perspective. The overall strategy performed well during first quarter 2019, capturing more than 60% of the strong gains generated by the MSCI All Country World Index. While the extreme market action of the last two quarters occurs infrequently, this type of trading environment can provide useful insight into portfolio manager behavior and psychology. Analyzing portfolio management decisions, as opposed to stock selection or external factors, though interconnected, can help improve future manager selection.
This chart book presents representative long-only and hedge fund manager performance for fourth quarter 2018. The median US Core Bonds manager posted the highest median return for fourth quarter 2018, returning 1.4%. The median Cash Management manager posted the best returns for the one-year period ending December 31, 2018, with a return of 2.0%. The median US Small-Cap Growth Equity manager posted the lowest median return for fourth quarter 2018 (-20.4%). The median Global ex US Small-Cap manager suffered the worst performance (-19.1%) for the one-year period.
In this quarter’s update, we look at the market pressure long/short equity managers experienced in October as technical selling by some tightly risk-controlled multi- manager platforms and other volatility-targeting strategies, combined with a deleveraging effect stemming from ongoing redemption activity (including announcements of several high-profile fund closures) created major headwinds for the strategy.
Myriad rising risks weighed on performance in 2018, leaving investors few places to hide among the sea of red.
Following a more gradual climb in first half 2018, US equities appreciated materially in third quarter, ending September just off record highs set in the prior weeks. The S&P 500 Index returned 7.7% in third quarter and 10.6% year-to-date; by comparison, the Russell 2000® Index returned 3.6% and 11.5%, respectively. All Global Industry Classification Standard…