Billions of dollars of institutional investor money pulled from traditional investments in the second quarter could be heading either for return-chasing alternative assets – or to the safety of cash.
The $120 billion (€106.8 billion) outflow from traditional strategies that eVestment recorded appears at a fork in the road, though what is clear is the Q2 net disinvestment in traditional stocks and bonds continued an outflow pattern from Q1 when investors pulled $75.1 billion from traditional investments.
In its ‘Traditional Asset Flows Report’ for Q2, eVestment – which maintains an asset-flow database – said: “While still only a fraction of the trillions institutional investors control, this multi-billion-dollar outflow from traditional strategies and products in the first half of this year could be a sign investors are increasingly looking at alternative investment options or holding onto cash.”
This week a Bank of America Merril Lynch fund manager survey noted that fund managers had increased their cash holdings due to bearish feelings about the short-term outlook.
Traditional Europe ex-UK equity products saw outflows of $6.2 billion and the same category of fixed income saw outflows of $17.5 billion, the eVestment data shows.
The report also notes that environmental, social and governance products, known more commonly as ‘ESG’, saw $1.8 billion of inflows. The researchers said that ESG strategies “get a lot of search activity” on eVestment databases.
Two other findings were that US core fixed income and ‘core plus’ had large inflows ($9.9 billion and $4.2 billion, respectively), and that investors domiciled in Canada, Japan and Latin America saw general inflows ranging from $14.4 billion (Japan) to $1.7 billion (Latin America).
Investors remain bullish on international equity markets, eVestment said, and recorded Q2 inflows of $6.1billion to its ACWI ex-US Equity universes, while the EAFE Equity universe reported inflows of $1.7 billion.
But the firm warned that the full impact of the UK’s Brexit vote may not be reflected until Q3 data.
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