Australian institutional investors redeemed about US$1.7 billion from their equity managers in the March quarter, erasing the US$1.6 billion they had invested in the December quarter. The latest redemptions were the same as for the whole of Europe in the same period.

The latest data from eVestment, the global investment performance research firm, show that despite the infusion of new assets, particularly in Australia thanks to the Superannuation Guarantee, the total for the past four quarters remained in “firmly negative territory”, with outflows of US$104.9 billion. Among the positives, allocations to the US – up US$9.5 billion – and global – up US$20.7 billion – were the standouts in the March quarter.

The latest eVestment institutional investment flows report for ‘traditional assets’ says the highlights were:

• Long-only asset managers reported Q1 2019 institutional assets under management of US$26.8 trillion to eVestment
• Allocations were pervasive across passive strategies in 1Q
• Australian equity managers experienced net institutional redemptions of -$1.7 billion during the most recent quarter, erasing the +$1.6 billion in inflows gained in Q4 2018.

Other interesting trends from the data show that fixed income managers, excluding cash management strategies, reported net institutional inflows of US$22.6 billion in the most recent quarter. The greatest contributors on a dollar basis were passive US ‘core’ (+$16.8 billion), active US ‘core’ (+US$12.3 billion) and global multi- sector fixed income strategies (+US$13.0 billion).

Peter Laurelli, the eVestment global head of research and lead author of the report, says: “Net allocations were more widespread for global bond than for US bond strategies; redemptions were particularly prevalent for active US managers, and US bank loan strategies were the most significant detractor in the fixed income space with institutional outflows of -US$19.1 billion in Q1 2019, the second straight quarter of sizeable redemptions after running in the black for two years.”

In total, the report shows, institutional investors pulled US$86.4 billion from equity managers in the March quarter. Passive equity strategies posted positive results, though, with institutional inflows of US$31.1 billion. Active strategies, of minus US$117.5 billion, continued to be a drag on the headline figure. Allocations were pervasive across passive strategies, though. On a geographic basis, there positive flows to passive strategies in international (non-US) and emerging markets, representing the largest gains.

Laurelli says in his commentary with the report: “Aside from redemptions decelerating for the largest active equity universes in Q1 2019, compared to the prior year’s average, flows for active equities were generally poor. The deceleration in outflows may be attributable to the Q4 2018 drawdown in equity markets leading to rebalancing-led inflows.

“On a more granular basis, the active equity managers that saw the greatest allocations during the quarter were global growth-style strategies (+US$3.6 billion total) and ACWI ex-US core and growth strategies (+US$2.0 billion). Active China equity managers also saw continued support. Across our China A-Shares, Greater China, Overseas China and Hong Kong equity universes, Q1 2019 institutional flows totalled +US$1.5 billion in Q1 2019 and +US$8.8 billion over the past year.”

– G.B.