The Natixis Portfolio Clarity® research team monitors asset classes, investment products and the markets, both in real time and from a historical perspective. See what trends were driving asset allocation during the unprecedented market environment in the first half of 2020.

#1 – Pandemic Dominated Investor Mindshare
The COVID-19 pandemic was certainly top of mind for both equity and fixed income investors in 1H 2020. Google searches for COVID-19 showed a remarkably strong (negative) correlation to S&P 500® performance. Fed watchers saw references to COVID overshadow many of the familiar points of emphasis from past meetings, specifically trade and tariffs.

"COVID-19" vs. S&P Performance

Word Count, Fed Beige Book


Word Count, Fed Beige Book

"COVID-19" vs. S&P Performance
Sources: Natixis Portfolio Clarity®, Google Trends; Federal Reserve;


#2 – First Half Flows: Higher Highs and Lower Lows
1H 2020 saw the largest ever volume of both positive and negative institutional asset flows, highlighted by large flows out of US long duration strategies and into cash. This has led to wide divergence between investment policy statement allocations and actual holdings. A look at potential future net asset flows suggests increased commitments ahead for equity, real estate and real assets, funded from fixed income and cash.


Implied Future Net Institutional Asset Flows
Implied Future Net Institutional Asset Flows
Source: Natixis Portfolio Clarity®, eVestment; Mid-Year data as of 5/31/20; End of Year data as of 11/30/19. 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.


#3 – Public Pensions Tread Water
Funded ratios for public pensions have not improved much in recent years, due in part to declining investment return assumptions. This trend is likely to continue for FY 2020 as results are released this fall. Several states facing shortfalls in tax revenues due to the COVID-19 crisis cut their planned contributions, including Colorado, South Carolina, and New Jersey. Meanwhile, the calendar timing of the market drawdown and recovery this year potentially obfuscates June 30 funded status results for public pension systems with private market investments, which will likely be understated due to the three-month lag in reporting net asset values.
Public Pension Return Assumptions, 2016–2019

Public pension funded ratios, 2016-2019
Public Pension Funded Ratios, 2016–2019

Public Pension Return Assumptions, 2016-2019
Sources: Natixis Portfolio Clarity®, Boston College Center for Retirement Research, Public Plans Data. 2001-2020. Center for Retirement Research at Boston College, Center for State and Local Government Excellence, and National Association of State Retirement Administrators.

#4 – Defined Contribution Matches Cut or Suspended
A growing number of US employers reduced or suspended 401(k) contributions in 2020, or indicated plans to do so, including Marriott, Amtrak, Macy’s, and ExxonMobil. Nearly 20%1 of US companies ultimately took similar steps during the 2008–09 financial crisis, and a median suspension time of 12 months ultimately followed.2 Plan sponsors in harder hit industries facing larger or longer-term cuts may need to reassess their participants’ path to retirement income adequacy, which could mean adjusting the target risk level.

#5 – Increased Return Dispersion Favored Active Manager Performance
Elevated volatility led to outsized performance dispersion across many asset categories during both Q1 and Q2, creating more opportunities for active managers. Trends were particularly strong in global equity and global high yield.

Greater Return Dispersion Across Global Equity and Global High Yield in 1H 2020

Greater return dispersion across global equity and global high yield in H1 2020  Greater return dispersion across global equity and global high yield in H1 2020
Sources: Natixis Portfolio Clarity®, Morningstar, eVestment


#6 – Modest Fee Reductions Across Most Asset Classes
Institutional investors saw slight fee reductions across most equity and fixed income categories in the first half of 2020.


Average stated fee
Source: Natixis Portfolio Clarity®, eVestment

1 CNBC, Sarah O’Brien, Employers may drop 401(k) matches as companies look to cut expenses

2 Pensions & Investments, Robert Steyer, Previous crisis offers clues on when matches will return, Copyright 2020 by Crain Communications

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