Notable shifts occurred within US equity allocations, as assets shifted out of large and mid-cap and into small cap, as well as out of growth and into value and blend. These shifts, particularly at the style level, reflect changes in classifications due to rapidly changing market dynamics (e.g., more securities and funds held by advisors are now classified as value and blend), and not due to proactive shifts by advisors.
In the fixed income markets, advisors extended maturities in the taxable and municipal markets, decreasing short and medium term holdings and increasing long term holdings.
Here are some of the more significant movements during the quarter:
- Cash positions increased by 1.0%, continuing a trend that has been evident since August of 2007. Since that time, cash holdings have increased from 7.9% to 12.2% of total assets. During the fourth quarter, equity holdings (US and non-US) decreased by 4.4%, while the Dow decreased by 14.0%, from 10,325 to 8,876, and developed non-US markets (based on EFA) declined by 19.3%. Fixed income positions increased by 3.7%, while the benchmark performance (the Lehman AGG) was up 5.2%. If advisors had not rebalanced during the quarter, equity allocations would have decreased by approximately 4.5% and bond positions would have increased by 3.5% due to market movements, and cash would have increased by 0.9%. Since these movements approximate the actual movements, we can infer that, in the aggregate, advisors did not rebalance during the fourth quarter.
- Continuing a trend from the third quarter, assets shifted into US equity and fixed income markets (+0.2%), as non-US positions decreased (-2.0%). This is largely the result of market movements and not due to rebalancing by advisors. Since our analysis began in May of 2007, there has been a shift in assets out of US markets (from 71.4% to 66.9%) and non-US markets (from 9.8% to 9.1%), as cash positions have increased from 8.4% to 12.2%. As we noted previously, this is largely the result of market movements rather than proactive decisions or rebalancing by advisors.
- Within the US equity markets, there was a shift out of large cap (-4.1%) and into mid cap (+1.7%) and small cap (+2.4%), as well as into value (+9.8%) and blend (+7.4%) and out of growth (-17.4%). Over the past three quarters, allocations to growth have decreased by 25.5%, from 31.0% to 5.5%. This shift in style allocations is not due to market movements, and instead is explained by changes in classifications of funds and individual stock positions (i.e., more stocks and funds are now classified as value than in the previous quarter).
- Within fixed income allocations, muni bond assets decreased by 3.2% and taxable bond assets increased by 0.1%. More significantly, taxable and municipal maturities continued to extend. On the taxable side, maturities lengthened considerably, with short term assets decreasing by 5.5%, medium term assets increasing by 0.1% and long term assets increasing by 5.3%. On the municipal side, short term assets were unchanged, while medium term assets decreased by 3.4%, and long term assets increased by 3.3%. Investment grade taxable bond holdings decreased by 4.1% and medium grade holdings increased by almost the same amount. Municipal bond holdings exhibited the same pattern, with investment grade holdings decreasing by 3.7%, medium grade holdings increasing by 1.7%, and high yield holdings increasing by 1.9%. These changes in quality are mitigated by the fact that ratings are generally being downgraded, so a lack of rebalancing or proactive decisions would have the same effect on allocations.
Methodology
Every quarter we review changes in Asset Allocation in the Advisor Perspectives (AP) Universe. Previous analyses were done:
This week we look at changes from October 3, 2008 to December 31, 2009.
Our analysis looks at changes across the entire AP Universe. The AP Universe consists of assets from high net worth (HNW) and ultra-high net worth (UHNW) investors being managed by Registered Investment Advisors (RIAs). The AP Universe is divided into three tiers based on account size. In the tier containing the Largest Accounts, the average account size is approximately $3.7 million (and this remained constant over the 12 week period). Approximately 94% of the assets (by market value) are in the Largest Accounts, so this analysis is primarily indicative of shifts in this account tier.
The tables below show the complete data for the AP Universe for each of the prior measurement periods. The number in parentheses is the total AUM as of 12/31/08.
By Asset Class ($43,201,173,440)
Asset Class |
5/27/07 |
8/15/07 |
11/15/07 |
1/31/08 |
4/26/08 |
6/30/08 |
10/3/08 |
12/31/08 |
Bonds |
27.7% |
29.2% |
28.9% |
28.1% |
24.8% |
24.6% |
26.7% |
30.4% |
Cash |
8.4% |
7.9% |
9.0% |
9.8% |
10.7% |
11.1% |
11.2% |
12.2% |
Equities |
63.5% |
62.1% |
60.9% |
60.9% |
62.7% |
62.4% |
60.4% |
56.0% |
Other |
0.4% |
0.8% |
1.2% |
1.2% |
1.8% |
1.9% |
1.7% |
1.4% |
Asset Class |
Change From |
||||||
5/27 to 8/15 |
8/15 to 11/15 |
11/15 to 1/31 |
1/31 to 4/26 |
4/26 to 6/30 |
6/30 to 10/3 |
10/3 to 12/31 |
|
Bonds |
1.5% |
-0.3% |
-0.8% |
-3.4% |
-0.2% |
2.1% |
3.7% |
Cash |
-0.5% |
1.1% |
0.8% |
0.9% |
0.4% |
0.1% |
1.0% |
Equities |
-1.4% |
-1.2% |
0.0% |
1.8% |
-0.3% |
-2.0% |
-4.4% |
Other |
0.4% |
0.4% |
0.0% |
0.6% |
0.1% |
-0.2% |
-0.3% |
By Domicile ($43,201,173,440)
Asset Class |
5/27 2007 |
8/15 2007 |
11/15 2007 |
1/31 2008 |
4/26 2008 |
6/30 2008 |
10/3 2008 |
12/31 2008 |
Cash |
8.4% |
7.9% |
9.0% |
9.8% |
10.7% |
11.1% |
11.2% |
12.2% |
Foreign |
9.8% |
11.5% |
12.1% |
11.7% |
13.3% |
12.7% |
11.1% |
9.1% |
Unknown |
10.4% |
11.2% |
11.3% |
10.6% |
10.6% |
11.4% |
11.1% |
11.8% |
US |
71.4% |
69.4% |
67.5% |
67.9% |
65.4% |
64.7% |
66.7% |
66.9% |
Asset Class |
Change From |
||||||
5/27 to 8/15 |
8/15 to 11/15 |
11/15 to 1/31 |
1/31 to 4/26 |
4/26 to 6/30 |
6/30 to 10/3 |
10/3 to 12/31 |
|
Cash |
-0.5% |
1.1% |
0.8% |
0.9% |
0.4% |
0.1% |
1.0% |
Foreign |
1.7% |
0.6% |
-0.4% |
1.6% |
-0.6% |
-1.6% |
-2.0% |
Unknown |
0.8% |
0.1% |
-0.7% |
0.0% |
0.8% |
-0.3% |
0.7% |
US |
-2.0% |
-1.9% |
0.4% |
-2.6% |
-0.7% |
2.0% |
0.2% |
Non-US Assets ($3,941,306,491)
Non-US Assets |
5/27/07 |
8/15/07 |
11/15/07 |
1/31/08 |
4/26/08 |
6/30/08 |
10/3/08 |
12/31/08 |
Foreign Developed Equities |
88.4% |
73.2% |
75.1% |
78.2% |
77.6% |
77.9% |
75.6% |
72.7% |
Foreign Emerging Equities |
8.7% |
23.9% |
21.8% |
18.6% |
18.9% |
18.7% |
19.8% |
23.3% |
Foreign Bonds |
2.9% |
2.9% |
3.1% |
3.3% |
3.5% |
3.5% |
4.7% |
4.0% |
Non-US Assets |
Change From |
||||||
5/27 to 8/15 |
8/15 to 11/15 |
11/15 to 1/31 |
1/31 to 4/26 |
4/26 to 6/30 |
6/30 to 10/3 |
10/3 to 12/31 |
|
Foreign Developed Equities |
-15.2% |
1.9% |
3.1% |
-0.5% |
0.3% |
-2.3% |
-2.9% |
Foreign Emerging Equities |
15.2% |
-2.1% |
-3.2% |
0.3% |
-0.2% |
1.1% |
3.5% |
Foreign Bonds |
0.0% |
0.2% |
0.2% |
0.2% |
-0.1% |
1.2% |
-0.7% |
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