As the Article 9 fund universe continues to evolve in the third quarter of 2024, driven by ongoing regulatory developments and shifting manager priorities, it is evident that sustainable investing remains a long-term commitment. However, in an industry often shaped by short-term market dynamics, maintaining regular engagement with asset managers is essential to assess how their strategies and priorities are adapting to the changing landscape.
This review covers 55 global actively-managed Article 9 funds, encompassing 14 Nordic-based equity funds, 12 fixed-income funds, and 29 international funds, split between public and private asset strategies.
Both international partners and Nordic global Article 9 equity managers outperformed in Q3 on average. In both groups, managers reported benefitting from the ongoing rotation away from large-cap growth stocks. Indeed, smaller-cap stocks and value sectors’ performance was spurred by the Federal Reserve’s interest rate cuts and easing recession fears. IT, industrials such as water and cleantech and energy efficiency contributed positively, while renewable energy companies showed mixed performance. The healthcare sector’s performance contribution also varied for different managers.
In the Fixed Income space, the rate cuts by the the Federal Reserve, European Central Bank, Bank of England and Nordic central banks drove bond yields lower and benefitted Article 9 funds. They saw improved absolute and relative returns, supported by macroeconomic conditions, duration management, and strong performance in the real estate sector. Fund managers noted market volatility preceding rate cuts, but resilient credit markets and narrowing credit spreads contributed positively.
Private market funds, meanwhile, exhibited mixed performance. Geopolitical instability and currency fluctuations, particularly the depreciation of the US dollar, posed challenges for some funds. Solar energy investments thrived, but issues like declining agricultural commodity prices and transaction costs impacted returns in other sectors. Fund managers remain optimistic about sustained growth, particularly in emerging markets, and the potential for further monetary easing to support future returns.
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