Passive momentum continues, says Cerulli Associates
Asset managers believe that international and global equity and fixed-income passive strategies, including enhanced index and smart beta products, are likely to take market share away from active investment strategies in the institutional channels over the next 24 months, according to a survey by Cerulli Associates.
The May 2014 issue of The Cerulli Edge – US Monthly Product Trends examines passive investment strategies and explores the growth of passive mutual fund assets.
According to the report, April net inflows into exchange-traded funds (ETFs) totalling USD18.5 billion helped lift the vehicle's YTD flow total to USD30.3 billion. International equity ETFs meanwhile topped the flow league table in April with USD8.5 billion. US equity and taxable bond ETFs followed with net flows of USD3.8 billion and USD3.6 billion, respectively.
Mutual funds saw net inflows of USD27.8 billion in April. For a second consecutive month, taxable bond mutual funds topped all other asset classes with monthly net inflows of USD8 billion in April, despite bank-loan funds being in net redemptions during April.
Active traditional and core US strategies are most vulnerable to the growth of index-based strategies. More than USD60 billion of US equity flows in 2013 were in passive strategies compared to only USD3.4 billion in active funds. Surveyed managers revealed that they are developing new active products that do not compete directly with passive strategies (e.g. multi-strategy and outcome-oriented products) for both retail and institutional.
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