In the latest issue of The Cerulli Edge—U.S. Monthly Product Trends, a detailed analysis of product trends up to October 2023 is presented, focusing on mutual funds and exchange-traded funds (ETFs).
The report delves into the shifting advisor allocation to alternatives in the context of a rising rate environment, providing a comprehensive overview of current market dynamics.
As of the end of October, mutual fund assets were valued at $16.6 trillion, marking a significant decrease from the July 2023 peak of $18.2 trillion.
The month saw a 2.9% decline in mutual fund assets, primarily due to net negative flows amounting to $79.1 billion, translating into an organic growth rate of -0.5% for October. In a similar vein, ETF assets experienced a downturn amidst the fluctuating equity and fixed-income markets during October.
The total value of ETF assets fell by 2.4% to just under $7.0 trillion. However, this decrease was somewhat offset by positive net inflows totaling $30.4 billion throughout the month. The current rising rate environment poses challenges for advisor engagement with alternative investments, as it renders a variety of other exposures more appealing.
Nevertheless, the industry is set to maintain its momentum, propelled by significant advancements in product structures and a deepening understanding of alternatives among advisors. Over recent years, these aspects have seen considerable improvement, and many managers are actively promoting these exposures.
To navigate this landscape effectively, managers are advised to concentrate not only on distributing alternatives but also on ensuring transparent communication regarding the risks associated with the rate environment. Prioritizing the development and strategic positioning of product lines, rather than focusing solely on specific high-performing exposures (e.g., consultative sales processes), is likely to yield long-term benefits for asset managers.
For Funds Society, Madrid