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Smart Beta Compass

Investor Behaviour

A snapshot of the cross-sectional patterns of institutional equity flows and holdings.

Institutional Style Positioning

The analysis covers 10 style dimensions: Market Beta, Idiosyncratic Volatility (further referred to as Idiosyncratic Beta), Dividend Yield, Inflation Exposure, Value/Growth, Relative Value to History, Relative Value to Industry, Low Size (Small Caps), Price Momentum, and Relative Efficiency (further referred to as Relative Quality).

Temps de lecture: 5 min

Investor Positioning Still Pushed to Polarizing Extremes

Positioning in Relative Quality and Market Beta stocks are nearly as overweight a signal as possible (99th percentile in comparison to historical data) at the end of Q4. Following the US election, flows accelerated in Q4 into Small Cap stocks despite closing the quarter historically underweight. Higher Dividend Yield and Relative Value stocks continue to attract inflows amidst a context of strongly underweight holdings.

Figure 1: Institutional Style Positioning

(Quarter End)

Trend Flows

In addition to the latest investor positioning in each of the significant style dimensions, the active flows trend can provide further context on investor sentiment.

Below we analyse the trend in active flows across two time series: the daily change in 60-day trend flows over the past year and the daily change in 20-day trend flows over the past quarter. Each of the charts provides expanded context on the trend of investor flows leading up to the quarter-end positioning (Figure 5).

The 60-day trend flows experienced style dispersion in Q3 before consolidating towards the end of the quarter. Small-cap stocks broke away from the group with a strong positive 20- and 60-day trend inflow to close the quarter. Value stocks also experienced strong trend inflows into quarter end.

Trend Holdings

In addition to the latest investor positioning in each of the significant style dimensions, the historical holdings trend can provide further context on investor sentiment.

The below time series shows the monthly change in investor holdings over the past year. This chart provides expanded context on the trend of investor holdings leading up to the quarter-end positioning (Figure 5).

At the end of Q4, investor holdings in higher Market Beta and Relative Quality stocks are as overweight as we have observed in the history of the data set. Conversely, holdings in higher Dividend Yield, Small Caps, Relative Value, and Value/Growth are as underweight as we have observed.

Figure 5: Institutional Style Holdings

(Last Quarter)

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