There are signs, however, that money managers might not be trimming their sails to meet that demand for more alpha, said Mr. Itah. He pointed to data in Casey, Quirk's review showing the average tracking error for top-quartile U.S. large-cap core equity managers dropping to between 4% and 6% now from between 6% and 10% two years before.
The same pursuit of high returns seemed to be playing out on the fixed-income side during the past year. Casey, Quirk's review showed net inflows of $34 billion for core-plus products, partly offset by $11 billion of outflows for lower-risk core products.
Mr. Itah said another finding from the review is that even as growth equity investing showed signs of emerging from a five-year slump during 2005, institutional investors continued to favor value investing. For the year, value equity products took in net inflows of $14 billion, while growth equity products saw net outflows of $29 billion.
While the 53% more assets institutional investors collectively had in value equity strategies at the end of 2005 was down slightly from the peak of 55% in June, 2005, that imbalance was still greater than the record 50% growth bias at the height of the tech bubble in March 2000, Mr. Itah said. At the very least, that points to a likelihood of a further rebalancing in favor of growth for risk management purposes, he said.
Among U.S. equity subclasses, midcap equities were the most prominent winners, with value, core and growth strategies pulling in net inflows of $10.6 billion, $4.8 billion and $3.4 billion respectively. Large-cap value was the only other net gainer, pulling in $8.9 billion.
Casey, Quirk's review cited Alliance Capital Management (now AllianceBernstein), as the money manager with the greater number of consistently strong products during the year. Among CQA's top-10 tables for 30 separate long-only equity and fixed-income peer groups, the New York-based firm had six strategies that ranked for each quarter of 2005. Boston-based Fidelity Investments was next with five, followed by Goldman Sachs Asset Management, New York; Wellington Management Co., Boston; and Pasadena, Calif.-based Western Asset Management Co., with four each.