Investors might still be pulling money from stock pickers,
but at least one form of active management is seeing a
New data from eVestment show that institutional
investors allocated a net $55.3 billion to active fixed-income
strategies in the first three months of 2017. It was the fourth
straight quarter of positive flows to fixed income, with
passive funds gaining $14.1 billion.
Money has shifted into the asset class as investors continue
to pull billions from traditional equities managers, according
to eVestment. While equities investors are increasingly
shifting to passive strategies, fixed-income markets are viewed
as less inefficient, making active management more attractive,
according to Tim Bruce, NEPCs director of traditional
You do not have very good passive options available in
fixed income, said Bryon Willy, the lead fixed income
researcher at Mercer. They tend to skew the portfolio
toward higher duration and lower yield. It becomes an easier
methodology to beat.
Some active managers are outperforming benchmarks by 50
basis points, net of fees, said Taylor Furlong, a fixed-income
research analyst at NEPC.
The popularity of active mandates in fixed income can be
attributed in part to rising duration and floating bank rates,
according to Bruce, who noted his firm has seen a high volume
of fixed-income manager searches this year as investors adapt
to the changing market.
Corporate pensions are also pouring more money into credit
and bonds as part of their liability-driven investing
strategies, according to Willy. As funded status
improves, youre going to see increased allocations to
longer duration fixed income and decreased allocations to
longer risk assets like equities, he said.
Redemptions from active equities managers totaled $120.4
billion last quarter a figure only slightly offset by a
net allocation of $43.1 billion into passive strategies.
Meanwhile, the majority of fixed income strategies were up
this quarter, led by global credit and global aggregate funds.
Fixed income is a more attractive sector for active bets than,
say, large-cap equities, where theres not such an
obvious way to beat the S&P 500, Willy said.