There has been a substantial amount of U.S institutional hiring activity happening in 2021, especially in the third quarter. Comparing Q3 2021 with Q3 2020 and Q3 2019, that activity is up a staggering 177% and 73%, respectively. In our analysis, we examined U.S Tax-Exempt activity in Q3, focusing on Equity and Fixed Income. We then graphed the number of assets gained by active managers and where this activity was allocated. Our preliminary data showed a total of $22.3B in activity during Q3 across the board. We also highlight a few managers who have had a particularly successful Q3 based on the total assets gained they have reported to our Investment Metrics Global Database as of October 21, 2021.
In Q3 2021, Fixed Income was slightly ahead of Equity, $12B versus $10B, which was not surprising given that Fixed Income is typically the larger asset class that receives institutional money. Multi-Asset and Real-Estate Investment Trusts also received funding in the same quarter. Leading the pack in the Multi-Asset space is Connecticut-based AQR, which won $200M for their Risk Parity portfolio that invests across a wide variety of global markets, including developed and emerging market equities, Fixed Income, and Commodities. On the REIT side, Principal and Cohen and Steers each received $80M with their Global REIT investment trust portfolios.
In terms of plan allocations for Q3 2021, Corporates and Health & Welfare Plans allocated quite heavily to Fixed Income. This trend seems to have a significant impact on their Net Performance over a one-year period. On the other hand, Public, Endowments & Foundations, as well as Taft-Hartley plans have all allocated 50% or more into the Equity space and these plans have all seen nearly 20% returns. U.S. Equity has been up 15% YTD and 16% over 3 years (based off the Russell 1000 Index). A big revelation is the record one-year returns of Endowments & Foundations. This shows how having a significant public equity exposure was exceedingly helpful to these plan types.
The biggest U.S. Fixed Income Tax-Exempt assets gained for Q3 2021 were in Broad Core/Core+, Long Duration, and Corporates, with $3.7B, $3.5B, and $2.5B, respectively. Below you can find the top 20 asset gainers in Q3 2021 based on the data provided to our global database. We were surprised to see a good number of long-duration products. As inflation continues to rise, one may think there would be a bigger focus on short-duration types of portfolios, but this does not appear to be the case. A particular product to highlight is Loomis Sayles’ Multisector Full Discretion portfolio ranked 17th on our list below. We have seen quite a bit of interest in the unconstrained/ Core+ types of portfolios where Fixed Income managers are allowed more leeway to delve into different sectors to find additional yield. Another portfolio to note is J.P. Morgan’s High-Quality Yield Portfolio. This riskier Fixed Income portfolio concentrates on below-investment-grade bonds with maturities between 3 and 10 years.
Given the run U.S. public equity has had, we also looked at the Top 10 Equity Products from U.S. institutional investors in Q3 2021. Not shockingly, the top product on our list belongs to Laguna Beach, California-based asset manager WCM. Its Quality Global Growth portfolio received $571M in Q3 2021. Also notable are Barrow Hanley’s Non-U.S. Value product and Brandywine’s Classic Large Cap Value product. These portfolios show how we are seeing Value bounce back despite Growth outperforming for the past 13 years. Over the past year, we are seeing institutional investors tactically allocating into value and we have seen value stocks bounce back in a big way over the trailing 12 months. So, some U.S. institutional investors have timed the turn in style performance correctly.
Q3 Top 10 Equity Products from US Institutional Investors
In closing, it will be interesting to see how hiring activity will change in Q4 and beyond. The $22B U.S institutional hiring activity in Q3 2021 was a significant amount. It will be important to keep an eye on those long-duration Fixed Income as the fears of rising inflation continue to grow.
