• Asset managers have faced considerable economic headwinds in financial markets in 2022, particularly at the conclusion of third quarter, with the S&P 500 dropping by more than 9%. Less than 50% of active managers in eight out of the nine equity style boxes beat their Morningstar category index in 3Q22, with Mid-Cap Value being the sole exception.
• While inflation, increased costs of borrowing, and mixed signals across a wide variety of other key economic indicators have dented equity returns, certain fixed-income products focused on the short-intermediate term of the yield curve produced better returns during 3Q22. For example, nearly 86% of active managers in the Municipal National Short category outperformed their Morningstar Category Index, despite outflows of $22.0 billion from Muni National Short open-end funds and ETFs as of the end of September.
• Demand vs. actual performance of underlying funds may diverge in the foreseeable future as investors de-risk portfolios in favor of products with a higher level of liquidity or that employ a more passive approach; Money Market Funds experienced a $36.0 billion spike in new investment during October following the downside pressure in equity markets during the prior month.

% of Managers that Beat the Category Benchmark, 3Q22

Source: Morningstar