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Quarterly Review: Investment Themes for Advisors

A look back at our most popular research from the second quarter of 2018

Tom Lauricella

 

The industry is changing quickly for advisors, from fund fee trends to the state of the global stock market. To help you stay up-to-date on what your peers are reading, we’ve compiled a roundup of the top five investment themes that advisors are reading about in Research Portal within Morningstar Cloud.

5 investment themes that financial advisors were thinking about last quarter:

  1. U.S. fund fees experienced the largest year-over-year decline since we started tracking. Investors paid an average 0.52% expense for funds, marking an 8% decline from 2016. This is the largest year-over-year decline we've seen since we started tracking this data in 2000. Lower fees from active funds also had an impact on investors’ fund expenses, and we saw a large uptrend in net flows into funds with a low Morningstar Fee Level rank. Read more in our annual fee study from analyst Patricia Oey.

  2.  Charts, charts, and more charts. Morningstar's quantitative research team reviews the most recent global market trends in finance and evaluates the performance of individual asset classes in the Morningstar Markets Observer. In our quarterly collection of charts and analysis, we've detailed how first-quarter returns were affected when February inflation fears hit investors and where the prospects of increased U.S. tariffs influenced global returns, among other market insights. Read highlights from the most recent Markets Observer data.

  3. The markets blazed a volatile path in first quarter of 2018. Many indexes finished the first quarter in the red, a weakening dollar helped bring in positive returns for Morningstar’s Chinese, Japanese, and Mexican indexes, once converted into U.S. dollars. We also saw a sharp divide between growth and value, with value ending the quarter at -2.96% and growth ending with 4.01%. Index strategist Dan Lefkovitz recaps the quarter in six charts exclusively in Research Portal, sign in to get access or take a free trial.

  4. Valuation pressures in the global stock landscape, explained in five charts. We look at the current state of equities through the lens of Morningstar Investment Management’s bottoms-up valuation process and top-down asset allocation approach. The global landscape is experiencing different valuation pressures, however, while developed market equities are costlier. Investors are willing to pay a premium in the post-crisis period, but emerging market valuations have rebounded from a far lower base. The U.S. market also accounts for almost 60% of the developed market basket, giving it the ability to tilt the aggregated outcome more-so than other developed markets. The full commentary is available exclusively in Research Portal, sign in to get access or take a free trial.

  5. Answering the question: Do multi-asset income funds deliver? Objectives-based funds—sometimes talked about as goals-based or outcome-based investments—generally deliver on their objectives and have higher than average yields without sacrificing returns. At the end of March, these funds had an average 12-month yield of 3.4%. Janet Yang, global data director, breaks down the findings from this report on objectives-based institutional fund categories and introduces these peer groups.

The Research Portal makes it easy to access Morningstar’s research and commentary from our expert teams of manager, stock and credit analysts. Get a free trial of Morningstar Cloud to access more of the latest investment themes. All articles are available to current Morningstar Cloud subscribers.

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