The Natixis Portfolio Clarity® research team monitors asset classes, investment products and market action, both in real time and from a historical perspective. See which trends were driving asset allocation in the final months of 2020.

#1 – Institutional Investors Finally Deploy Cash
Cash strategies saw net outflows of $41 billion in the third quarter of 2020 – the first net outflow quarter in two years and the largest quarter of net outflows since Q3 2008. A look at ongoing and potential institutional mandates suggests a broad set of asset classes could see some attention from plan sponsors in 2021.

Number of Ongoing and Potential Institutional Mandates
Number of Ongoing and Potential Institutional Mandates
Source: eVestment, as of 10/15/20

#2 – Global Population of “Unicorns” Has Doubled
Institutional demand for growth has fueled a 100% increase in the number of privately held startup companies valued at $1 billion or higher, over the past two years. There are now over 500 of these “unicorns”, with nearly three-quarters based in either the United States or China. Industry representation has been led by fintech, internet software & services, e-commerce, and artificial intelligence. The total unicorn cohort now makes up $1.6 trillion in aggregate valuation.

Unicorns % by Country
Number of Unicorns by country
Source: CB Insights

Unicorns % by Industry
Number of Unicorns by industry

#3 – Sustainable and Impact Investment Screening on the Rise
Institutional ESG research activity points to increasing interest in sustainable and impact investment screening. Within active global equity mandates, dedicated ESG strategies also saw a spike in market share during 2020.

Most Commonly Screened ESG Fields
WEBART94 1220 Portfolio Clarity  US Instl Trends Web Article ChartsFebruary ForWEB F2 Barchart Rev
Source: eVestment

Active Global Equity Strategies
Active Global Equity Strategies

#4 – Colleges and Universities Issue Muni Debt to Avoid Tapping into Endowments
Faced with Covid-related cash flow challenges, many colleges and universities opted to issue debt in the municipal bond market rather than tap into their endowments. Yet despite the increase in new issuance, massive demand for high-rated debt kept yields low.

S&P Municipal Bond Higher Education Index Yields
S&P Municipal Bond Higher Education Index
Source: S&P Dow Jones Indices LLC

#5 – Corporate Pension Discount Rates Stabilizing
Corporate pension discount rates stabilized in the second half of 2020 after plummeting in Q2. Plans with 13-14 year durations saw discount rates used for pension accounting decline from 2.6% at 6/30/2020 to 2.4% at year end. The strong equity rally in 2H 2020 finally translated into gains vs. pension liability growth after the Q1 equity selloff and subsequent dip in corporate bond yields initially wiped away years of gains.

Corporate Pension Discount Curves
Corporate Pension Discount Curves
Sources: FTSE, FactSet

Equity Returns Finally Outpace Pension Liabilities
Equity returns finally outpace pension liabilities

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