Εβδομαδιαία Επισκόπηση: Διεθνής Οικονομία & Αγορές, 02/12/24
The S&P500 is on track to earn more than double (+27%) its annualized rate of return since 1984
Investors have poured more than $600 billion into US-domiciled long-term active and passive funds in the past twelve months. A typical 60%/40% equity/fixed income portfolio has returned 23% in the same period (89th percentile since 1984) with annualized volatility of 8% (41st percentile since 1984). Strong equity gains due to valuation expansion and sizable EPS growth, as well as narrowing corporate spreads, currently at multi-year tights, have driven portfolio returns higher.
Fixed income funds have enjoyed strong inflows of c. $500 billion or 7.5% of assets under management in anticipation of lower policy interest rates by the Federal Reserve and the related bull steepening of the treasury curve, as well as due to pockets of volatility.
Both active and passive instruments have seen inflows. The success rate for active managers was elevated in the fixed-income space, with circa two out of three active bond funds beating their passive peers in the past one year.
Equity funds have pulled in $145 billion or just 0.7% of assets under management in the trailing twelve months. However, the subdued performance is the tale of two markets. The strong growth of passive investing, mainly via exchange traded funds (ETFs), continued in the equity space, with inflows of $533 billion or 4% of assets under management. As of Q2:2024, total US-domiciled ETF AUMs were $9.1 trillion, up from $1.0 trillion in 2010 or 16% CAGR.
On the other hand, actively managed equity investment funds have experienced outflows of $388 billion or -4.5% of assets under management. The rotation from active to passive equity funds, which has seen over $2.5 trillion out/into flow in the US since 2010, continues. As of Q2:2024, total US-domiciled mutual fund excluding money market AUMs were $20.1 trillion, up from $9.0 trillion in 2010 or 6% CAGR.
The large-cap equity market has challenged active managers for years. Their winning rate was c. 50% in the past one year, descending towards 40% in the three and five-year looking-back periods due to, inter alia, the exponential increase of market concentration amid the outperformance of mega-techs.
Moreover, the rising percent of US households seeking low-fee and greater tax-efficiency access to the equity universe has probably contributed to the above-mentioned trend. The asset-weighted average expense ratio (the fund’s total costs divided by its total assets, which is then passed on to investors) for passive equity ETFs was 0.15% versus 0.65% for actively managed mutual funds, according to ICI data.
US equity indices rose to new heights in the past week as economic announcements were better-than-expected. US Treasury yields declined by 20 bps wow (10-Year: 4.18%), albeit remain circa 50 bps higher compared with their year-to-date lows, as market participants have priced in a less aggressive interest rate cut plan by the Federal Reserve.
On the other side of the Atlantic, a weaker-than-expected euro area core CPI monthly outcome and the French budget debacle sent 10-Year Bund yields lower by 15 bps to 2.08%.
Investors have poured more than $600 billion into US-domiciled long-term active and passive funds in the past twelve months. A typical 60%/40% equity/fixed income portfolio has returned 23% in the same period (89th percentile since 1984) with annualized volatility of 8% (41st percentile since 1984). Strong equity gains due to valuation expansion and sizable EPS growth, as well as narrowing corporate spreads, currently at multi-year tights, have driven portfolio returns higher.
Fixed income funds have enjoyed strong inflows of c. $500 billion or 7.5% of assets under management in anticipation of lower policy interest rates by the Federal Reserve and the related bull steepening of the treasury curve, as well as due to pockets of volatility.
Both active and passive instruments have seen inflows. The success rate for active managers was elevated in the fixed-income space, with circa two out of three active bond funds beating their passive peers in the past one year.
Equity funds have pulled in $145 billion or just 0.7% of assets under management in the trailing twelve months. However, the subdued performance is the tale of two markets. The strong growth of passive investing, mainly via exchange traded funds (ETFs), continued in the equity space, with inflows of $533 billion or 4% of assets under management. As of Q2:2024, total US-domiciled ETF AUMs were $9.1 trillion, up from $1.0 trillion in 2010 or 16% CAGR.
On the other hand, actively managed equity investment funds have experienced outflows of $388 billion or -4.5% of assets under management. The rotation from active to passive equity funds, which has seen over $2.5 trillion out/into flow in the US since 2010, continues. As of Q2:2024, total US-domiciled mutual fund excluding money market AUMs were $20.1 trillion, up from $9.0 trillion in 2010 or 6% CAGR.
The large-cap equity market has challenged active managers for years. Their winning rate was c. 50% in the past one year, descending towards 40% in the three and five-year looking-back periods due to, inter alia, the exponential increase of market concentration amid the outperformance of mega-techs.
Moreover, the rising percent of US households seeking low-fee and greater tax-efficiency access to the equity universe has probably contributed to the above-mentioned trend. The asset-weighted average expense ratio (the fund’s total costs divided by its total assets, which is then passed on to investors) for passive equity ETFs was 0.15% versus 0.65% for actively managed mutual funds, according to ICI data.
US equity indices rose to new heights in the past week as economic announcements were better-than-expected. US Treasury yields declined by 20 bps wow (10-Year: 4.18%), albeit remain circa 50 bps higher compared with their year-to-date lows, as market participants have priced in a less aggressive interest rate cut plan by the Federal Reserve.
On the other side of the Atlantic, a weaker-than-expected euro area core CPI monthly outcome and the French budget debacle sent 10-Year Bund yields lower by 15 bps to 2.08%.