By Peter Laurelli, CFA | eVestment Global Head of Research
Each issue of eVestment’s quarterly Institutional Intelligence report uses flows and viewership data to identify 10 “trending” universes: Five best poised for inflows and five most vulnerable to redemption risk. We revisited our previously published reports to see if positively trending universes did, in fact, see net inflows and similarly, whether negatively trending universes experienced net outflows.
Our findings: Yes, trending universes are very likely to see asset flows in subsequent quarters that track the trend line (positive or negative).
In Q4 2019, Nasdaq and eVestment published our first quarterly Institutional Intelligence Report. The goal was to use data from the eVestment platform to highlight asset managers’ primary strategy universes which appear to be experiencing meaningfully positive and negative trends, indicating if they may be entering a relatively conducive or unfavorable capital raising environment.
With six quarters of data available since quarterly publication began, we wanted to see if positively trending characteristics have resulted in relative capital raising success, and vice versa.
There appears to be a positive and persistent relationship between trending universes and institutional net flow.
The proportion of products within a universe that have net inflows in a given period.
The proportion of all product views across the platform captured by each universe.
How Trending Universes Are Identified
First, it is important to understand how the Institutional Intelligence Report determines a universe to be positively or negatively trending. Each quarter, we rank all eVestment primary universes among the 100 most important by their changes in two metrics – win-rates and viewership capture.
Win-rates are the proportion of products within a universe that have net inflows in a given period and viewership capture is the proportion of all product views across the platform captured by each universe. Change is measured as the values for both in the current quarter minus their values from the prior four quarters. The five universes with the best combined rankings are deemed the most positively trending and the five with the worst are the most negatively trending. The 100 most important universes in a quarter are determined by the largest volumes of net flows and the most profile views.
The quarterly asset flow data available for top ranked trending universes show there appears to be a positive and persistent relationship between trending universes and institutional net flow.
The 100 most important universes are determined by largest volume of net flows and the most profile views on the eVestment platform.
Source: Nasdaq eVestment Institutional Intelligence Report Q2 2021
What does the data show?
A trend is only as strong as the consistency of the underlying variables influencing its existence. The unfortunate reality of our recent world is there are two major points in time with unique influences – the order of things pre-pandemic, and post-pandemic onset. When we look at the efficacy of trending universes, we’ll focus on the four reports produced from Q2 2020 through Q1 2021, as each are based on viewership and flow data post-pandemic onset.
The two earlier reports’ findings, however, are intriguing. For example, of the ten most negatively trending universes (five from each report), nine have accrued net outflows over the quarters since publication through Q2 2021, and both of the No. 1 ranked positively trending universes have accrued net inflows since publication – Infrastructure with $5.1 billion and US Stable Value (Book) Fixed Income with $9.9 billion.
Outside of these highlights, there are clear shifts. Global Passive Equity had net inflows emerge at first after showing positively trending characteristics, then the net inflows shifted meaningfully negative post-pandemic onset.
Positively trending universes at time of publication show net inflows in subsequent quarters, while negatively trending universes show net outflows.
The relationship between both positively and negatively trending universes and capital raising success in aggregate for the universe is clearly evident in the subsequent quarters’ data. The following two charts show the aggregated quarterly net institutional flows for the five most positively trending universes (Chart 1) and five most negatively trending universes (Chart 2) for each quarter following their published rankings.
Chart 1: Positively Trending Universes
Chart 2: Negatively Trending Universes
Aggregate quarterly net flow for five most positively (Chart 1) and negatively (Chart 2) trending universes post Institutional Intelligence Report publication covering Q3 2020-Q2 2021.
An example of how to interpret the above charts is that for the five most positively trending universes in the Q3 2020 Institutional Intelligence Report, the sum of their net flows was positive in each of the three quarters after they were deemed most positively trending. The five universes had $21 billion net inflows in the first quarter post-publication, $33 billion in the second quarter post-publication and $24 billion in the third quarter post-publication.
Additionally, the five most negatively trending universes from the same report had significant net outflows ($16 billion) one quarter after release and in the following two quarters.
When we look at the net flows together for all the most positively trending universes and all the most negatively trending for all post-publication quarters, the difference appears clear and significant (see Chart 3).
In the four quarters since Q2 2020, the sum of net flows for the five most positively trending universes in quarters after report inclusion is over $160 billion compared to nearly $80 billion in net outflows for negatively trending universes. One initial thought may be that one or two universes account for all the inflow or outflow, but that’s not what is happening.
Of the potentially 20 positively and 20 negatively trending universes with flow data now available after featuring in the report, three within each group have been in the top five more than once. Of the 17 unique universes within each group, four within each did not follow the trend. Thirteen universes, or 76% of both groups, did.
The largest asset gainer among those positively trending, US Short Duration Fixed Income – Gov/Credit, accounts for about 29% of all the group’s net inflows, occurring over three quarters after its initial inclusion. The fact it is among the most positively trending more than once supports its largest asset gains.
On the negatively trending side, US Small Cap Growth has the largest net outflow at $15 billion and accounts for only 17% of that group’s net outflows. A distribution of inflows and outflows and a quarterly breakdown are illustrated in the following charts:
Chart 3: Net Flows
Aggregate and cumulative net flow for five most positively and negatively trending universes in quarters post-publication covering Q3 2020-Q2 2021.
Chart 4: Distribution of $168B Net Inflow
Chart 5: Distribution of $86B Net Outflow
Distribution of net inflows (Chart 4) and outflows (Chart 5) for most positively and negatively trending universes covering Q3 2020-Q2 2021.
The charts do highlight the concentration of net inflows within certain universes compared to a broader distribution of the net outflows, though it is also clear the instances and magnitude of contradicting flows is less on the positively trending side of the matrix (Chart 6).
Chart 6: Net Flow for Positively Trending Universes
Quarterly breakdown of net flow for most positively trending universes Q3 2020-Q2 2021.
Chart 7: Net Flow for Negatively Trending Universes
Quarterly breakdown of net flow for most negatively trending universes Q3 2020-Q2 2021.
Strength of Trending Characteristics and Net Flow
Next, let’s look at whether flows have been more significant, for example, for the No. 1 ranked universes compared to the others. Basically, is there an apparent relationship between the relative strength of the trending characteristics and magnitude of net flow?
To illustrate an answer, we can refer to Chart 8, which sums the net flows for each of the universes’ ranking groups. If a product was in the top five more than once, flows are included since its highest ranking.
As an example, four universes that have been ranked No.1 most positively trending in reports produced since Q2 2020 have accumulated $74 billion in net inflows in the quarters since their rankings.
The majority of the net flow has been into the aforementioned US Short Duration Fixed Income universe accrued over three quarters and the Global Large Cap Growth Equity universe accrued over four quarters. The most recent No.1 ranked universe, Global EM Fixed Income – Local Currency, did have net outflows in its first quarter post-ranking.
The No. 1 ranked universe from Q4 2020 has had two consecutive quarters of net inflows, though not near the magnitude of the earlier ranked universes. On the most negatively trending side a relationship is also evident, but less direct.
Chart 8: Cumulative Net Flows
Cumulative net flow by ranking position post-report inclusion covering Q3 2020-Q2 2021.
Trending universes appear indicative of ensuing flows, on both sides of the matrix
The characteristics to determine trending universes in the Institutional Intelligence reports are available to any eVestment client with access to Asset Flows and Advantage data. Whether the rankings of universes by these metrics as organized in the reports will continue to consistently identify areas where asset managers may find relatively conducive or unfavorable capital raising environments will remain to be seen.
At this point in time, however, flow data from subsequent quarters has indicated a positive and persistent relationship on both sides of the trending matrix. Digging into additional characteristics about the universes, including regional sources of net flow and viewership, which is shared at the country-specific level for both asset owners and consultants, positively and negatively trending products and other detailed metrics about each universe will help managers better interpret the drivers of each trends.
Currently trending universes are analyzed in our latest report. If you’d like to learn more about incorporating flows and viewership data in your own forecasting models, request a consultation with one of our API specialists: email@example.com.