With the broader financial industry dealing with extraordinary challenges, and our local economies and communities deeply affected by the fallout from this global pandemic—we think it’s more critical than ever for us to continue to bring transparency to an industry that has been historically opaque.

We recently introduced our Addepar ISI (methodology found here), which uses portfolio-level transaction data to gauge investor sentiment. This year, the ISI has proven to be a valuable tool to capture investor behavior in the U/HNW segment.

2020 Lookback

In our December Research Note, we look back at the year 2020 from the lens of the ISI. Here is what we uncovered:  

During the major market sell-off between February 19 and March 23rd, ultra-high-net-worth (U/HNW) investors were generally bullish and added equity exposure. Overall trading activity also rose rapidly, coinciding with a spike in market volatility. 

But investor optimism waned just as markets bottomed, and investors turned bearish on equities from April through October of 2020 (7 consecutive months), the longest “risk-off” period since we’ve been tracking the index. Clients report that this is due to cash accumulations and portfolio rebalancing.

In 2020 sector-level dispersion also reached its highest level in two decades, and U/HNW investors made significant shifts in their sector allocations. Key shifts included:

  • Investors turned bullish on the technology sector at the beginning of the March rally, although they sold off moderately as valuations increased and portfolios became increasingly overweight in the sector.

  • Consumer Cyclicals became popular early in the pandemic. Starting March 3, the sector ISI turned very positive. While it tapered off in May, it again became positive on August 25 through the year-end as the reality of a longer-than-expected pandemic set in.

  • Though allocations to energy have generally been small, investors continued to shift out of energy from April through the end of 2020.

  • Investors timed the financials sector well and have remained bullish through the major rallies of this year.  

Stay Tuned

Looking forward, we will continue to develop analytics that provide additional value to our clients through the aggregated and anonymized investment data on our platform. Keep up to date on the monthly ISI index, our key observations and periodic research notes on our website, or contact us at investor-sentiment@addepar.com for more information.