Asset managers track institutional investor and consultant activity on the eVestment platform to uncover trends about their universes and strategies. This viewership activity can be used as a leading indicator of future flows (both inflows and outflows).
The relationship between consultant and investor viewership activity and asset flows can often be seen prominently after a positive or negative event. This relationship is an integral part of the distribution process that advanced asset managers are deploying to compete for and retain assets. A key aspect of this data-driven distribution process involves analyzing momentum, understanding trends and evaluating leading indicators at both a universe level and as well as for specific strategies.
Looking at the Correlation of Views to Flows at the Universe Level
At the universe level, it can be easy to see how large spikes in viewership activity can affect flows. For example, let’s look at the Global Emerging Markets All Cap Growth Equity universe. As seen in the chart below, there was an increase in views of 175% from December 2014 to March 2015, followed by an increase in flows by 162% from Q4 2014 through the end of Q2 2015.
Understanding Which Strategies are Poised for Significant Changes
Viewership activity (or the lack thereof) can be associated with not only desirable performance or portfolio attributes, but also with negative events such as poor performance, lacking stability or the departure of a key figure. Either can greatly impact strategy flows.
Within our example universe, you can see one of the underlying strategies was a main benefactor in terms of increased viewership by consultants and investors. In Q1 2015, this strategy saw an increase in viewership of 600%. This was followed by top quartile flows relative to the universe totaling almost $600 million in Q1 and Q2 2015.
Spikes in viewership at the strategy level can be a leading indicator for flows up to two to three quarters in advance. Such correlations can be recognized by analyzing viewership and flows side-by-side. In the above example, the product flows increased in conjunction with the increased viewership activity at both the universe and strategy level. However, several quarters after a decrease in views, the strategy saw significant outflows.
Quantifying the Impact of Key Personnel Departure
In this example, a key person at a prominent asset management firm announced their departure in Q3 2014. This resulted in a spike in views of the strategy and ensuing flow volatility.
At the same time, there was significant increase in viewership of a similar strategy. Views on this strategy increased by over 2x and flows increased from $633 million to $3.6 billion from Q3 2014 to Q4 2014. The ensuing inflows indicate that this strategy was the initial recipient of the outflows from the original firm that lost key personnel. While key personnel leaving a company is not an everyday occurrence, it is a helpful example which clearly shows the relationship between asset flows and viewership activity.