According to Investment Metrics' most recent fee analyzer report, active management fees dropped last year after underwhelming returns. U.S. fixed-income managers saw the largest reduction in fees, with a 7% average annual cut. In fact, post-negotiated fees for active managers decreased in most categories last year. The report was based on the analyses of almost 490 distinct accounts and co-mingled funds. According to Investment Metrics, the fee reduction trend appears to correspond to poor performance of active managers as most categories fell short of beating their standards. Scott Treacy, a research consultant at Investment Metrics, wrote the following in the report, “Normally, the fixed-income asset class protects investors when equity markets crater, but that did not happen in 2022.” He added, “Active U.S. fixed income disappointed in particular. Unfortunately, at a median level, active managers were not able to perform well in this environment.” While active managers had a chance to demonstrate that their expertise could shield portfolios during the downturn, the underwhelming results may put greater pressure on active strategies. Treacy concluded that “Those active managers that were not able to perform in the down market of 2022 will most likely see their assets go to passive strategies, or to other active managers that performed well in this difficult environment.”

Finsum:Active management fees dropped last year after managers produced underwhelming returns, with U.S. fixed-income managers seeing the largest reduction in fees.

While it might seem like the real estate industry is performing poorly, appearances can be misleading. That is according to Todd Henderson, Co-Head of Global Real Estate DWS Group. Real estate was ranked as the S&P 500's third worst-performing sector in 2022, but Henderson believes the real estate business is a lot stronger in reality. He asserts that the market from rentals to home buyers is doing well with exception of commercial office buildings. He told Yahoo Finance that “The underlying fundamentals of real estate are quite strong.” According to Henderson, rental vacancies finished last year at 5.3%, the lowest vacancy rate on record since 1988, while the rental industry saw 7.5% income growth in 2022, the highest historically, except during the recovery from COVID. He also noted another positive development, an increase in millennial homeownership. He said this will continue to bolster housing market activity. According to recent Pew Research, from 2016 to 2021, nearly every U.S. state saw an increase in the number of young adults aged 25-44 forming new households. Henderson also notes that the market has seen an increase in cash buyers. According to data analytics firm Attom, Americans bought one of every three single-family homes and condos with cash in 2022.

Finsum:While it seems like the real estate market is struggling, Todd Henderson, Co-Head of Global Real Estate DWS Group, believes the underlying fundamentals remain strong due to rental vacancies being the lowest in years, an increase in millennial homeownership, and an increase in cash buyers.

Sustainable funds that invest based on factors such as a company’s carbon footprints and workforce diversity were able to attract new investments in 2022, despite a broad market selloff. According to Morningstar, investments into U.S. ESG funds including stocks, bonds, and other categories fell to $3.1 billion in 2022 from $69.2 billion a year earlier, while conventional funds that don’t consider ESG factors, saw more than $370 billion in withdrawals last year. Fixed-income funds accounted for about 75% of sustainable inflows or $2.4 billion. Sustainable products are benefitting from capital chasing greener investments in response to a warming planet, while governments and regulators are increasingly setting ambitious climate targets. This is pushing companies to shrink their carbon footprints. Morningstar’s associate director of sustainability research, Alyssa Stankiewicz, stated, “Investors are experiencing more and more the first or secondhand effects of climate change and societal inequality, and that’s driving their desire to want to have a positive impact.” Some of the ESG fixed-income funds with the largest inflows invest directly in renewable energy and low-carbon transit alternatives. For instance, the Calvert Bond Fund saw $413 million in inflows last year, the third-highest inflow of any sustainable bond fund last year, according to Morningstar.

Finsum:Amid a broad market selloff last year, sustainable bond funds continued to see inflows while non-ESG funds experienced $370 billion in withdrawals as investors chased greener investments in response to a warming planet.

One of the top financial stories in 2023 so far is the hot bond market. But it’s not just true for institutional investors, retail traders are also piling into bonds. One reason for this is that it has never been easier to buy Treasuries. They can be bought directly from the Treasury Department, at discount brokerages, or accessed through ETFs. It is also due to a huge shift in fixed income as rate expectations have sent yields on bonds to their highest in years. The 2-year, 10-year, and 30-year treasuries are all yielding around 4%. In fact, retail traders are so honed in on buying bonds, they've crashed the TreasuryDirect website repeatedly. Shawn Cruz, Head Trading Strategist at TD Ameritrade, recently told Yahoo Finance that “For pretty much the entire decade, leading up to this year, when people asked about retail and fixed income, I could just simply say, ‘no one really cares.’ The past year, that has significantly changed.” Sales of Treasury bills with maturities of one year or less through TreasuryDirect were $12.0 billion in January, a new record. BlackRock, the largest provider of ETFs by assets, has also benefited from this boom. So far in 2023, investors have poured $9.9 billion into U.S. iShares fixed-income ETFs.

Finsum:Retail traders are piling into bonds this year due to easier access to Treasuries and the highest bond yields in years.

Alternative investment platform CAIS recently announced that Graham Capital Management, L.P., a global alternative investment firm with approximately $17.9 billion in assets under management is adding select alternative investment funds on the CAIS Marketplace. Graham specializes in providing quantitative and discretionary macro strategies. The announcement coincides with positive performance across macro strategies over the last year. The Graham fund currently listed on the CAIS marketplace has undergone a third-party due diligence process conducted by Mercer and will be made available to thousands of RIAs and independent broker-dealers who oversee more than $3 trillion in assets. As part of the announcement, Brian Douglas, Chief Executive Officer of Graham, stated, “2022 was a strong year for macro and a reminder of the importance of portfolio diversification. We are optimistic that the opportunity set for our strategies will continue to be strong, so we are particularly excited about the timing of our partnership with CAIS.” While the private wealth channel has historically been under-allocated to alternatives compared to institutional investors, a recent CAIS-Mercer survey found that nearly 88% of advisors intend to increase their allocations to alternatives over the next two years. This follows news in January when CAIS announced that its platform is adding Reverence Capital Partners funds.

Finsum:Due to rising demand for alternative asset classes, CAIS announced that Graham Capital, which specializes in discretionary macro strategies is adding select funds to the CAIS marketplace.