The first sets of data (see charts 1 & 2, above) provide a basic overview of flows among key asset classes, but it is hoped as more fund managers sign up and more data becomes available, the picture will become much clearer. The data will be collected quarterly, and portfolio institutional will be publishing the findings as soon as they are available. It is hoped that over time, the research will provide an unprecedented level of detail in terms of where institutional investors are allocating their money.
“We’re trying to build regional, asset class, strategy and product segments to make sure we’re representative in all the fields we’re analysing,” says Birch.
“We analyse the mechanics of the product – what it’s actually doing in terms of performance target, the underlying instruments it’s using and the underlying asset classes, we then tie it back to the brand or umbrella term for it. That enables us to talk about why investors are buying these products and what they are trying to achieve.”
The picture emerging from the first collection of data holds few surprises for UK investors: equity allocations have fallen substantially, while multi-asset continues to rise. Spence Johnson consultant Will Mayne believes this is simply reflective of the decline of defined benefit funds.
“This is very much getting pulled along by a UK DB story, which is unsurprising,” says Mayne. “As DB pension funds have de- risked and begun to close there has been a move out of equity allocations over a number of years as they’ve started to diversify their growth assets.
“Anyone active in the UK pensions markets will be unable to avoid the acronym DGF (diversified growth fund) these days and that’s been coming through in the data where you can see a strong multi-asset trend.”
The fixed income data looks fairly static in these charts, but there is likely to be a significant amount of movement taking place within the asset class. This is something Spence Johnson hopes to uncover as more data comes in.
“At the moment it’s a flat line, but style is something we want to get an idea of: the return objectives; is it passively index replicating? Is it following a benchmark or is it high alpha and unconstrained?” Mayne explains. “I think we could have some interesting findings there.”
With the project now live and the first data sets collected, the team are keen to add to the information available.
Birch says: “Because it’s a bottom up approach it’s bringing a very rich data capability and insight into an industry which has really been quite data poor, and I think it will transform how we and all the participants in the project understand and work with the EMEA institutional market.”
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