Investor Relations

How Have External Market Factors Impacted Investor Decisions so far in 2022?

The first four months of 2022 have seen a perfect storm of macroeconomic and geopolitical events, which has led to a very high level of volatility across the financial markets. Following the invasion of Ukraine by Russia on Feb. 24, many Western nations introduced sanctions aimed at crippling the Russian economy. This created an economic shockwave across the world, principally caused by Western companies looking to reduce their exposure to the Russian market while reducing dependency on Russian oil and gas.

On top of this, inflation continued to gather pace, primarily due to economies emerging from the pandemic leading to a surge in demand and subsequent input costs. The recent news about the Russia/Ukraine conflict has pushed expectations for future prices higher still.

Lastly, despite many countries moving into a period that they would describe as “post-pandemic,” surging Covid cases in China has led its government to impose further restrictions pushing its economy to the brink of recession, causing significant supply chain issues across the global economy.

This unique set of circumstances has had a negative impact on global equity markets, although some companies have been able to weather the storm better than others. Nasdaq Advisory Services looked at investor ownership flows across its international client base since the beginning of 2022 to see what, if any, trends could be observed over the period. This can possibly help companies to better understand their positioning relative to the rest of the market.

A typical rotation away from Cyclicals, but distorted by inflated commodities prices

Sector index performance in the first four months of 2022 (Chart 1) paints a dim picture for European equities, bar the positive performance seen from Energy and Materials, which is perhaps unsurprising given rapidly advancing commodities prices and subsequent high expectations for earnings in these sectors. These two industries aside, there is a fairly typical story of more robust performance in defensive non-Cyclicals such as Telco, Utilities and Healthcare, while Cyclicals have fared worse, led by Technology, Consumer Discretionary and Industrials. Supply chain issues, as well as slowing global growth, is the main driver of the underperformance in these groups.

Stoxx Europe 600 Sector Indices

Source: Nasdaq IR Insight (data as of 30.04)

Flows reveal a similar Cyclicals/non-Cyclicals trend, but with a speculative twist

Sector flows represented by the amount of investor money moving in and out of Vanguard’s sector ETFs paint a very similar picture. Strong outflows from Cyclicals, led by Technology and Consumer Discretionary, are offset by positive flows into the traditionally defensive names. Surprisingly, Financials (a sector known to be particularly sensitive to economic uncertainty) leads the pack in terms of inflows, indicating that some investors see an opportunity beyond the near-term challenges. Financials typically benefit from rising interest rates, well-capitalized balance sheets and the fact that the sector is generally considered to be oversold more recently.

Vanguard ETF Sector Flows 2022 YTD ($M)

Source: Refinitiv Lipper for North America (data as of 30.04)

How has the institutional investment community reacted?

Long-only institutional investors have a reputation for taking a long-term view, looking beyond near-term events, whilst trying to remain focused on the fundamentals of the companies in which they invest. Indeed, Companies are often surprised that, following periods of high market volatility, their top investors have held tight and sometimes even used a declining market to increase their exposures. Most of the share price movements and market volatility are often driven by higher-turnover players who trade in and out of markets over a much shorter period of time.

Not to say that some actively-managed investment firms may have lost their patience (or their nerve) with certain investments whilst being enticed by opportunities that might provide a safer haven and better returns in a declining market. Indeed, Nasdaq Advisory Services has observed several investment firms follow the Cyclical/non-Cyclical trend identified in this report. Using a sample of its Shareholder Analysis clients and dividing them between Cyclicals and non-Cyclicals companies (whilst removing Energy and Materials to avoid any potentially distortive effects), the following key institutional investor activity was observed:

Top 10 Buyers of Non-cyclicals - 2022 YTD

The top buyers across Nasdaq non-Cyclicals clients since the beginning of the year feature a concentration of US-based firms. San Francisco-based Dodge and Cox’s International Value Fund, managed by Diana Strandberg, has by no means a strong non-Cyclicals focus, but it has recently increased its already overweight exposure to Healthcare.

Meanwhile, Artisan Partners, which is headquartered in Milwaukee but has portfolio managers on the East and West Coast, also likes Healthcare and has an overweight exposure to Consumer Discretionary too. This investor operates across a range of different strategies (Growth and Value) and is also known to participate in activist campaigns.

In Baltimore, T. Rowe Price Associates has an overweight exposure to Consumer Staples and Utilities. Raymond Mills’ Yield-focused Overseas Stock Fund is one of the firm’s primary international strategies. The firm also operates a range of funds out of its London office, including Richard Clattenburg’s International Stock Fund.

Lastly, Core Value Harris Associates in Chicago has picked up names across the Cyclicals space in 2022, largely through its flagship Oakmark International Fund, managed by David Herro.

Top 10 Sellers of Cyclicals - 2022 YTD

Investors that have reduced and de-risked their portfolios’ exposure to Cyclicals clients reveal a blend of geographies. Oslo-based sovereign fund Norges Bank often features in the “top movers” lists due to the sheer size of its equity assets and the centrally-controlled nature of its investment process. The firm reduced its exposure to the Financials, Consumer Discretionary and Industrials sectors recently.

Dutch pension fund APG Asset Management took a more cautious stance by trimming positions across Financials and Consumer Discretionary. Unsurprisingly, managers of pension assets are more likely to adopt a risk-averse approach.

In Asia, the Chinese sovereign fund SAFE Investment Company, which manages the foreign exchange assets for the People’s Bank Of China, has been a seller more broadly in recent months, likely linked to the pandemic-induced economic downturn in China. Economic downturns have the double effect on sovereign funds of reducing the amount of surplus to invest whilst at the same time increasing the number of funds drawn to support growing domestic deficits.

Elsewhere, Core Growth Ballie Gifford in Edinburgh was the top seller of Nasdaq Consumer Discretionary clients, a sector to which it has always maintained an overweight exposure.

Finally, the top U.S. seller across Cyclicals was Los Angeles-based Causeway Capital, which primarily invests in International equities through Harold Hartford’s International Value Fund. Causeway was one of the top sellers of Nasdaq Industrials clients.

What does this mean for Investor Relations?

  • When investment decisions operate along defined sector lines as they have done so far in 2022, the highly correlated nature of markets means that company fundamentals may take somewhat of a back seat. However, this does not mean that IR professionals need to wait for the storm to blow over. 
  • Shareholder maintenance should take precedent over development, but the extent to which this should happen depends on several factors, including the sector, the extent to which it is subject to outflows of risk-averse capital and inbound interest from investors.
  • Investors are likely to hold several names across the same sector in their portfolios from which they can reduce positions. As such, an understanding of what an investor’s exposure is across the peer group is critical to understanding how to position your company against the competition.
  • Finally, whilst shareholder development may feel like a thankless task during periods of heightened volatility, building a pipeline of prospective investors using an effective investor targeting strategy is important so as to hit the ground running when markets return to normal.

In this market environment, context is key to effectively position your company to withstand external market factors whilst maximizing opportunities resulting from ongoing rotations of investment capital.

Nasdaq’s Advisory team has extensive experience across all sectors and a unique set of proprietary tools, providing valuable contextual insight and helping clients connect with new capital flows. For more information on how Nasdaq can help your company with its IR program, please reach out to the team.

Andrew Gilmore


Andrew Gilmore is an Analyst within Nasdaq’s IR Intelligence business, specializing in the provision of Shareholder Analysis services to some of the largest companies within the EMEA region.

Read Andrew's Bio