Passive Momentum Continues: Core asset classes most threatened by rise in indexed strategies

The May Monthly Spotlight takes a close look at enhanced indices.

May 28, 2014 11:26 IST | India Infoline News Service

The May 2014 issue of The Cerulli Edge - U.S. Monthly Product Trends, examines passive investment strategies and explores the growth of passive mutual fund assets. The May Monthly Spotlight takes a close look at enhanced indices.


Highlights from this research:   

  • Active traditional and core U.S. strategies are most vulnerable to the growth of index-based strategies. More than $60bn of U.S. equity flows in 2013 were in passive strategies compared to only $3.4bn 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. 
  • According to a recent Cerulli survey, all asset managers surveyed believe that international and global equity and fixed-income passive strategies (including enhanced index and smart beta products) are likely to take marketshare away from active investment strategies in the institutional channels over the next 24 months. 
  • Mutual funds saw net inflows of $27.8bn in April. For a second consecutive month, taxable bond mutual funds topped all other asset classes with monthly net inflows of $8bn in April, despite bank-loan funds being in net redemptions during April.
  • April net inflows into ETFs of $18.5bn helped lift the vehicle's YTD flow total to $30.3bn. International equity ETFs topped the flow league table in April with $8.5bn. U.S. equity and taxable bond ETFs followed with net flows of $3.8bn and $3.6bn, respectively. 

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