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Investment Managers Survey
Q2 was another challenging quarter for discretionary managers, with growing concerns over inflation and the likely response of central banks taking centre stage. The MPI Sterling index posted negative returns in all three months across all risk categories, broadly in line with our estimates. Year to date, the Sterling indices are now down 8.79% (low), 10.01% (medium) and 12.84% (high), which are approaching the drawdowns of Q1 2020 during the CV-19 crisis. Unsurprisingly, based on our survey results from contributing managers, more than half had actively reduced weighting to equities, with 40% staying put. Only 10% of managers told us that they had taken advantage of the recent drawdown and made significant additions to their equity weighting. Perhaps more interestingly, several managers have recently looked to extend duration in the belief that bonds may have been oversold. In general, however, we saw a predictable flight to risk-off assets and into the USD; Hedge Funds and Infrastructure remained popular.
When asked how their economic outlook had changed over the quarter, around two-thirds of managers indicated they had become more cautious; none said they had become more optimistic. Regarding specific risks, central bank policy error continued to be a significant theme, with nearly half of managers citing this as their biggest concern.