Natixis Portfolio Clarity® is the portfolio consulting service of Natixis Investment Managers. Dedicated analysts monitor trends in asset allocation in the US and around the world, which are published semi-annually.

#1 – Pension liabilities increased.
High quality corporate bond yields fell over 1% in 2019, bottoming out around August 31. Corporate defined benefit plans with 12–13 year liability durations saw liabilities increase 18% for the year, mitigating the funded status impact of strong equity returns.

FTSE Pension Discount Curve, Spot Rate (%)
FTSE Pension Discount Curve, Spot Rate (%)
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Source: Natixis Portfolio Clarity®, FTSE Pension Discount Curve

#2 – Cash is king.
With flatter yield curves muting forward-looking return prospects in fixed income, investors increasingly looked to cash for safety. Flows into money market funds reached their highest level since 2009. Public pensions saw a sharp increase in cash positions in Q4, perhaps also motivated by a desire to earmark liquidity for capital calls.

Cumulative Money Market Flows as a % of AUM
(3/2/07 – 1/30/20)
Cumulative Money Market Flows as a % of AUM (3/2/07 – 1/30/20)

Cash and Cash Equivalents in Public Defined Benefit Plans
(% of Allocation)
Cash and Cash Equivalents in Public Defined Benefit Plans (% of Allocation)

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.
Source: Natixis Portfolio Clarity®, Invmetrics, FactSet


#3 – Waiting for inflation...
Has the market underpriced future inflation? Institutional investors showed renewed interest in allocating to inflation-sensitive assets. Potential future net asset flows, defined as gaps between investment policy statement allocations and actual holdings, suggest increased commitments ahead for both real estate and real assets.

Implied Future Net Institutional Asset Flows, by asset category
Implied Future Net Institutional Asset Flows, by asset category
Real Assets includes real assets, infrastructure, energy/natural resources, commodities. Equity includes public equity, private equity, public/private blend. Other includes multi-asset, hedge funds, alternatives, other. Source: Natixis Portfolio Clarity®, eVestment

#4 – The American bull market just keeps on running.
In a bull market that continues to favor the biggest names, allocations that were overweight US large-cap equities continued to outperform. Investors showed less interest in style-focused products, as flows moved out of value/growth funds and into blended strategies for the third year in a row.

Cumulative US Equity Flows
(in billions, 2/4/15 – 1/31/20)
Cumulative US Equity Flows (in billions, 2/4/15 – 1/31/20)
Source: Natixis Portfolio Clarity®, FactSet

#5 – Active management staged a SMID comeback.
Outside of the large-caps, active management added value. US small- and mid-cap active managers across all styles posted much stronger results in 2019, particularly in growth funds.

Percent of active funds outperforming passive funds
(as of 12/31/19)
Percent of active funds outperforming passive funds (as of 12/31/19)
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Data is based on rolling three-month average.
Blue boxes – 50% or more active funds outperforming. Light blue boxes – Less than 50% of active funds outperforming.
Source: Natixis Portfolio Clarity®

#6 – ESG allocations making inroads.
ESG (environmental, social and governance) use continues to rise among institutions. Survey respondents most commonly cited “organizational values alignment” as motivating their interest in ESG, with “alpha generation” a close second. While awareness of ESG investing is growing with financial advisors, it’s still a relatively minor factor in portfolio construction, with just 9% of advisor portfolios holding ESG allocations of 25% or more.

Institutional ESG Motivators
Institutional ESG Motivators
Institutional ESG Motivators
Percentages are represented of those that indicate they incorporate ESG into their practice. US Moderate peer group consists of 4,235 portfolios submitted to Natixis Portfolio Clarity® from January 2013 to December 2019. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Fund ESG status is based on Morningstar definition. Source: Natixis Portfolio Clarity® and Natixis Investment Managers, Global Survey of Institutional Investors conducted by CoreData Research in October and November 2019. Survey included 500 institutional investors in 29 countries.

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