Forget about the president’s performance in his first 100 days, I'm more interested in taking a look back at first quarter of the year to see which markets have come up trumps.
Emerging markets littered the top 10 during the first three months of 2017. Out in front is India with the Bombay stock exchange up 20% for dollar investors, with only 5% of that coming from a strengthening rupee. Next up the Mexican rebound has been sharp with a 16% gain for US investors, although 10% of that came from an appreciation in the peso.
Following in third is South Korea, which has risen 15%, although again this has been more down to the Korean won appreciating by 9% than stock market returns. It is surprising to see the country doing well against the backdrop of political and corporate scandals sweeping the nation. Not to mention the rising tension from its northern neighbor.
Across the board the start to the year has been positive for US investors, with every major international index in the black, save for Russia, which fell 3.2%.
Closer to home the stand-out feature is the reversal of the value-driven trade that was ever-present last year. The Russell 1000 Growth rose 9.1% compared with just 3.3% for the value index. Is this really the end of value’s resurgence after just 12 months in the sun?
Small caps failed to build on their fourth quarter momentum, with the Russell 2000 index generating a modest 2.5%. This suggests an air of caution from investors still waiting to see the promised deregulation, tax cuts and fiscal policy.
Emerging markets kick on in first quarter rise
In terms of where investors were moving their active money, fixed income sectors have been the real winner. The threat of inflation has pushed another $10.1 billion into the floating rate note sector, specifically Loan Participation funds. That represents 10% growth in the sector’s actively managed assets. To see the top performing managers in this sector turn to page 27.
The quartet of Multi-Sector Income, Core Bond Funds, Ultra-Short and Short Investment Grade sectors round out the top five in terms of flows.
The top equity sector was International Multi-Cap Core, which took in $2.3 billion of new money, followed by International Small/Mid Cap Core, which had an influx of $1.5 billion.
Despite these inflows, it was another quarter the active industry would rather forget, with net outflows of $22 billion from US mutual funds.
However, if you ignore the $45 billion outflow from domestic equity sectors, then it paints a very different picture.
The Liquid Alternatives market had a relatively good quarter, with a billion dollar inflow into Long/Short (see page 28) and $430 million into the sophisticated fixed income plays found in Bond Strategies.
Value still lags growth over three years