Investors looking for growth and high returns are turning back toward equities, particularly European and emerging markets equities because they are cheaper than U.S. stocks.
Paul Atkinson, head of North American equities at Aberdeen Asset Management, Philadelphia, told Pensions & Investments in a phone interview that as news of strong corporate performance began to emerge, investors “began to embrace more risk, come out of bonds and gravitate more towards equities” in the last two years.
He added that Aberdeen, which has $320.6 billion in assets under management, has “seen some flow in the U.S.,” particularly in the smaller-cap stocks, which are more leveraged.
“The equity market has been a longer-than-average bull market over the past five years,” said Mark N. Stahl, a senior vice president in Callan Associates Inc.'s global manager research group, San Francisco. “The statistics and return would show that, which has been great to see.”
Indeed, the number of equity mandates has been rising. According to a report released in January by Louisville, Ky.-based manager consultant Eager, Davis & Holmes LLC, both U.S. and international active equity mandates rebounded in 2013. In 2013, 373 U.S. active equity hires were made, up from the 305 made in 2012 and the 288 in 2011.
Chris Adkerson, a principal and senior consultant in the St. Louis office of Mercer LLC's investment business, said his firm saw a return of 32% in equities in 2013 after seeing roughly $431 billion go into equities that year (following an average of about $40 billion each year from 2009 to 2012 inclusive). Comparatively, Mercer saw $1.2 billion go into bond funds in 2013. Mercer's investment management division has $86.7 billion in AUM.
“Investors are seeing the returns in equities and jumping on board,” said Mr. Adkerson. He added, however, that his guess is that an equity bull market “is entering the final stage,” as he finds it “unlikely that we'll see a 30%-plus return in 2014.”
Not everyone shares this belief. Ashi S. Parikh, chairman, CEO and chief investment officer of RidgeWorth Investments, Atlanta, for example, believes that, rather than this being the end of an equity bull market, we're facing the prelude to a shift away from bonds towards equities.
“You can argue we're in an equity bull market,” he said. “I don't think we've seen that full-blown shift yet. I think it's still coming.”
RidgeWorth Investments manages $50.6 billion in assets.