Out of the 261 funds in the Zenith Investment Partners (Zenith) Diversified Fund universe only the Russell suite of funds achieved Highly Recommended status in the Research house’s Diversified Sector Report released last week. A further 39 funds received a ‘Recommended’ rating and 9 an Approved rating.
Zenith Senior Investment Analyst Andrew Yap said, “Zenith assigned a greater number of ratings across the Diversified sector in this review than in previous years. This coincided with the emergence of further quality offerings within each of our ‘Real Return’, ‘Single-Manager’ and ‘Multi-Manager’ categories.”
“Zenith attributes the continued growth in the number of strategies offered across this sector to a refocusing of business priorities, increased investor demand for tailored multi-asset strategies, and further legislative burden”.
When asked about changes Zenith had seen in the sector Yap said “Market conditions have further evolved since Zenith’s 2012 Review. Notwithstanding the challenges that continue to face many global economies, sentiment has broadly improved, and along with this volatility has moderated.”
“Zenith attributes this market dynamic to the significant fiscal programs and less traditional monetary policies pursued by governments and central authorities in an effort to restore investor confidence.”
Yap added, “These stimulatory market conditions are however posing numerous challenges for sector participants, and by consequence, Zenith has observed a number of developments across this sector”.
A summary of the key developments is provided below:
- Changes in Strategic Asset Allocation (SAA) are becoming more frequent and meaningful. Such change appears to be in contrast with the longer-term capital markets assumptions upon which SAA’s have traditionally been founded.
- Investment managers are finding it more difficult to identify large directional trade ideas, an area that has proven particularly fruitful in recent years. This raises questions as to whether sector participants will be able to generate similar returns in the years ahead.
- Sector participants are assigning greater resources to the identification of relative-value trade opportunities. This coincides with enhancements made to models which seek to quantify market imbalances owing to sentiment and other idiosyncratic factors.
- In an effort to enhance portfolio efficiency, a growing number of investment managers have sought to assign greater weights to discrete investment strategies such as smart beta.