Some 68% of manager searches initiated by institutional bfinance clients in the past year were for private market managers, a record high. The rise of private market searches coincided with an overall drop in search activity as the total number of searches initiated declined by 7%.
The ongoing market volatility has driven investor interest away from listed and towards unlisted markets, according to the consultancy. It registered a 13 percentage point rise to 68% in searches for private market managers in the year to 30 June 2022.
The number of searches for private real estate and private equity managers rose especially strongly. Searches for private debt managers also remained strong, benefiting from investors looking for portfolio diversification, income and inflation protection.
Only infrastructure manager searches were on a downward trend compared to the previous one-year period.
Public equity searches saw the biggest drop, commanding only 20% of new searches for the 12 months ended 30 June. An exception to this trend were emerging market (EM) equity mandates, where the number of pension funds and other investors looking for new managers actually increased.
EM equity manager searches accounted for a third of total equity searches, up from 19% a year earlier.
Robert Doyle, senior director – public markets at bfinance, said: “We see investors moving from passive approaches in emerging market equities towards active approaches as active managers have performed well on average.”
The Dutch scheme Pensioenfonds SNS Reaal is one of those pension funds to switch from passive to active in EM equities.
The wish to diversify portfolios has been another driver of increasing EM manager search activity, Doyle added. “We also see investors expanding their roster of emerging market equity managers in order to improve portfolio diversification and even tap into areas of the market that they may not currently have exposure to, such as small caps.”
Searches for EM debt managers saw an even stronger increase, up from 8% of fixed income searches two years ago to 42% now.
“A considerable amount of the increased manager activity has actually been manager replacement, where investors were dissatisfied with results,” noted Xavier Blaiteau, director – public markets.
He added: “In addition, we saw some new allocations to emerging market debt driven by widening spreads over the first half of 2022, and some diversification away from developed markets in a rising rate environment.”