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The global fund management industry reached new heights in 2013 on the back of resurgent investor confidence, according to Morningstar’s second annual Global Flows Report.
The research report examines 2013 mutual fund and exchange-traded fund asset flows in five key markets –Australia, Canada, Europe, Japan, and the US – and provides a worldwide overview of these and other markets in which Morningstar tracks fund performance and assets.
Michael Rawson, analyst for Morningstar’s manager research team, says: “Asset inflows and strong developed-market equity returns helped long-term fund assets reach nearly USD23trn, up more than USD3trn from 2012 and more than double industry assets at the market’s nadir in 2008. Although 2013 inflows of USD976bn are only slightly higher than the previous record set in 2009, their composition is vastly different. Investors have rotated out of fixed-income investments, which garnered the majority of inflows over the last five years, and into equities.”
Vanguard dominated worldwide flows again in 2013, as it did in 2012. The firm took in USD143bn and now manages USD2.3trn in long-term mutual fund and exchange-traded fund (ETF) assets.
On the other side of the spectrum, PIMCO, the beneficiary of the long bond bull market, saw outflows of USD29bn for the year as investors’ fear of rising interest rates prompted a long-anticipated exodus from bond funds. Eighty eight per cent of PIMCO’s mutual fund and ETF assets globally resided in fixed-income products at year end. Fixed-income funds attracted inflows of USD134bn in 2013, down sharply from USD602bn in 2012.
Equity funds enjoyed inflows of USD567bn globally and an organic growth rate of six per cent, the fastest since Morningstar began tracking worldwide flow data in 2007. Allocation funds had a strong year with inflows of USD220bn, driven by double-digit growth in Europe and among cross-border funds. Alternative funds collected USD97bn, more than doubling their 2012 showing; organic growth rates for the alternative category group exceeded 30 per cent in the US, Asia, and within cross-border funds.
Among equity funds, passive funds continued to gain share in most regions in 2013. This secular shift has been driven largely by the increasing awareness among investors of the role of cost in investment outcomes. Another growth factor is the adoption of ETFs among advisors in the United States, although ETFs in Europe are having a tougher time making such inroads.
Globally, assets in more than 11,000 truly new open-end funds—those that are not merely new share classes of funds that incepted before 1 January, 2013 – reached USD605bn in 2013.
Luxembourg was the domicile of choice in terms of assets under management, if not number of funds. By year’s end, assets of USD119bn resided in the 896 truly new products introduced in Luxembourg. Meanwhile, 3,256 fund share classes domiciled in the duchy with assets of USD57bn merged or liquidated during the year.
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