OVERVIEW
T
wo recent periods of wild market swings
- in August 2015 and the beginning of
2016 - had strong China undercurrents.
In August, the retail-driven mainland market
soared and collapsed as slowing GDP growth
and rising corporate debt became clear. One
result, in the context of funds in Asia, was
$40bn in outflows from mixed asset funds in
Q1, according Strategic Insight.
“During market swings,
investors are far more
likely to check whether
active managers
are doing what they
promise to do.”
Multi-asset funds “appeared to be less
attractive in a volatile stock market as they
have higher equity exposure”, said Bixue Zhou,
research analyst at Strategic Insight. “Investors
moved money to bond and guaranteed products
to better secure their assets.”
B
eyond capital flight, volatility has other
effects. Political and economic news
causes investors to think about how they
are investing, said Deborah Fuhr, managing
partner of UK-based research consultancy
Volatility has increased in all major markets since 2014
INDEX
2016*
2015
2014
S&P 500
11.91
13.75
11.31
FTSE Europe
17.21
16.12
13.50
FTSE 100
15.00
15.98
13.05
Nikkei 225
32.00
16.06
21.11
Hang Seng
22.55
18.21
14.29
FTSE World
14.21
13.03
11.07
Source: FE
* to 1 Jun ’16
ETFGI. During market swings, investors
are far more likely to check whether active
managers are doing what they promise to do.
“Discussion around active versus index funds
and the impact of fees on performance is
Asia fund outflows reflect the wild market swings at the start of the year
Net new fund flows ($bn)
FUND TYPE
Q1 2016
Q1 2015
Q1 2014
Bond
$26.23
$11
$(4.5)
Equity
$20.3
$19.3
$15
Guaranteed
$11
$1.4
$(837m)
Mixed asset
$5.9
$22.4
$(7.7)
Other
$2.2
$5.3
$2.1
Real estate
$(40)
$8.4
$4.1
Money market
$(64.5)
$26.7
$94.8
TOTAL
$(39)
$94.5
$103
a theme that has come to the fore,” she said,
adding that as of April 2016, global ETF assets
have hit a record high of $3.1trn.
Rethinking allocation seems to be underway
among China’s investors, according to David
Leung, head of wealth management at
Standard Chartered Bank in China. The trigger
came in August when a surprise devaluation of
the RMB/US dollar exchange rate sent global
markets tumbling. Leung said that since then,
the bank began seeing increased demand from
mainland investors for portfolio diversification
to include offshore assets.
Volatility seems here to stay for the medium
term. As markets soar and plunge based on
macro concerns, it will test the mettle of active
managers. Long-term conviction managers
will face pressure to hold or increase positions
during market selloffs and stockpickers
have the chance to show their skills.
Volatility can be an advantage for stockpickers. Headline-based selling tends to take
down entire sectors. A selloff in US stocks
based on fears generated by headlines over
the outcome of the US presidential election,
for example, can offer opportunities to pick
up sound companies at lower valuations. More
market volatility leaves more alpha on the table.
Could 2016 be the year of the active manager?
Source: Strategic Insight
For professional investors only
Fund Selector Asia Fund Insights Directory 2016
3