Quarterly report
Volatile quarter proves challenging for SI
Q3 was volatile, with uncertainty over the timing of Fed easing, concerns about global growth and both Technology and Energy equities underperforming. All SI equity strategies underperformed, with the SI fixed income performance broadly in line. The bright spot was the rate-sensitive alternatives market, which was very strong, with EPRA Nareit Green outperforming. Green Sovereigns also outperformed due to longer duration.
Key highlights:
- Volatile quarter impacts SI equities - Q3 saw volatility, the first US rate cut and a change in focus from inflation to growth concerns. The uncertainty led to all global SI equity strategies underperforming the market, with the FTSE4Good, a strong performer in Q1 and Q2, and growth-focused EnvOps seeing the largest underperformance. Understanding how SI performed in different historical market cycles is important for investors. In this edition, we add 10 years of historical relative performance for all SI strategies.
- Alternatives see strong rebound - Real estate and infrastructure markets were very strong in Q3, up well ahead of equity and fixed income markets. EPRA Nareit Green continued to improve in performance, outperforming in Q3, while Green Infrastructure underperformed.
- Technology and Energy underperform - The quarter saw both Technology and Energy underperform the market. As they are a key over and underweight in SI indices the effects broadly cancelled each other out, but were net negative for FTSE4Good and EnvOps.
- Most SI Bond strategies are in line; Green Sovereigns outperform - Returns for both sovereigns and corporate bonds were positive, with SI strategies broadly in line with market performance, except in the green bond market, where green sovereigns strongly outperformed, due to their longer duration, and green corporates underperformed, due to their shorter duration.
- SI Flows - SI fund flows, which had been under pressure in early 2024, have stabilised in Q3 seeing consistent monthly inflows to both equity and bond SI funds.
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