Fund managers chasing alpha in emerging markets
A Search for additional sources of alpha is pushing fund managers to increase their exposure to emerging markets, and take higher conviction positions in fewer stocks, according to new Standard & Poor’s research.
The report, titled Sector Report: International Equities — Large Caps, represents S&P’s inaugural review of the sector, and also incorporates long/short managers.
S&P reviewed 44 managers and applied star ratings to 155 funds in the report, which found that decreasing global share market volatility over the past three years was, in turn, driving the fund managers’ search for additional sources of alpha.
Other report findings were that managers with a long bias dominate the long/short peer group and median large cap managers still struggle to consistently outperform the benchmark.
S&P fund analyst Marcus Hanel said quantitative-style managers and long/short managers were “typically of high quality in the review and consequently have achieved high ratings”.
The review also saw a large number of downgrades, he said, “reflecting S&P’s new rating approach, which emphasises manager relativity as well as absolute changes in S&P’s levels of conviction”.
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