Global Mutual Fund Flows Decreased by 80% in 2011

Strategic Insight’s “The State of the Global Mutual Fund Industry” shows net inflows in the U.S., Asia and Latin America stood in contrast to outflows from Europe.

“Despite the aggregate industry flow compression, the top 1% of products in the industry were able to pull in $1 trillion in net new money last year, virtually unchanged from prior years – a continuation of the ‘winner takes all’ and blockbuster phenomena the industry has seen of late”, stated Daniel Enskat, head of global consulting for Strategic Insight and author of the report.  

A few of the key themes and data points discussed in the report include: 

• An equity-centric global fund industry refocuses in 2012: While fixed income has dominated flow statistics in recent years, the fund industry from an asset perspective evolves around equities. Globally, 42% of the over $30 trillion in total assets are held in equity funds, with another 9% in mixed products, bringing the total for equity/mixed funds to 51% of all global fund assets. 
• The industry is moving towards investment solutions and bridges: “Themes and simplicity still dominate the product landscape, but institutions and distributors around the world are gradually shifting towards ‘bridge’ products, leading towards investment solutions and absolute return themes, albeit with geographical nuances. The various forms of investment solutions and wrappers—among them lifecycle, multi-manager, fund-of-funds, multi-asset and other wrappers—overall are approaching $4 trillion in assets, with $110 billion in 2011 cash flows,” notes Enskat. The top three funds were all U.S.-based global asset allocation products (PIMCO All Asset, First Eagle Global, and Permanent Portfolio), with each over $5 billion in 2011 cash flows.  
• Alternatives on the rise: After a move back to basics after 2008, alternative and absolute return products have accelerated exponentially since then, now approaching 7.5% of global fund assets. Alternative funds in 2011 combined gathered $100 billion in net cash flows, with top funds Standard Life Global Absolute Return Strategies ($3.7 billion), Newton Real Return ($3.5 billion), Van Eck Market Vector Gold Miners ETF & ZKB Gold ETF ($3 billion each) and iShares Gold Trust ($2.8 billion).  
• “From a flow perspective, three meta-trends—future asset class/investment category demand, regional flow potential (developed vs. emerging) and concentration of leadership via selected blockbuster products—will be part of the conceptual framework for fund managers as they are mapping out brand positioning and growth strategies for the coming years,” said Enskat.  
• The best selling investment categories in 2011 were global bond ($63 billion), U.S. short-term bond funds ($61 billion), international/global equities ($57 billion), U.S. corporate fixed income ($39 billion) and real estate ($30 billion). Among the top five 2012 focus areas for institutions and global distributors based on proprietary Strategic Insight survey work are investment solutions, absolute return, client service, thought leadership and better digital information delivery.  
• The Winner-Takes-All:  2011 sharply delineated outcomes for fund managers. Blockbuster cash flow firms demonstrated thought leadership, tailored information delivery, simplicity in product positioning and clarity of investment process, and the top 1% of products combined took in almost $1 trillion in new money. Among the top global cash flow blockbusters in 2011: Vanguard Total International Stock Index, Templeton Global Bond, iShares DAX, Double Line Total Return and DaiwaSB Short-Term AU Bond.