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Independent broker-dealers drive long-term mutual fund and ETF asset growth

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Independent broker-dealers (IBDs) continue to lead in third party distribution of funds, accounting for USD1.9trn in long-term mutual fund and ETF assets under management (AUM) as of 30 September 2013.

That is according to quarterly data released by Access Data, a Broadridge Financial Solutions company, and Strategic Insight, an Asset International company.
 
Overall, third party distribution of long-term mutual fund and ETF AUM increased by 23 per cent to USD8.3trn in the third quarter of 2013, compared to USD6.8trn in the same period last year.
 
According to data released on Broadridge’s Fund Distribution Intelligence tool, registered investment advisors (RIAs) ranked second with USD1.58trn in long-term mutual fund and ETF AUM at the end of the third quarter of 2013, followed closely by wirehouses with USD1.52trn AUM.
 
The product mix making up the growth in year-to-date (YTD) AUM (ended 30 September 2013) varied by channel. The IBD channel overwhelmingly favoured long-term mutual funds with a USD241bn increase, representing 91 per cent of 2013 YTD growth, versus USD24bn, or nine per cent for ETFs. In contrast, the RIA channel growth was more balanced with a USD99bn increase in long-term mutual funds YTD, representing 65 per cent of the growth in the RIA channel, versus a USD53bn increase, or 35 per cent for ETFs. Wirehouse firms were similar to IBDs with the majority of the increase coming from long-term funds over ETFs, USD115bn to USD36bn, respectively.
 
“As market conditions improve, we continue to see total long-term mutual fund and ETF AUM within third party distribution increase significantly, on both a year-to-date and year-over-year basis. While the independent channels continue to drive overall growth, the use of products varies by type of firm. IBDs continue to show a preference for mutual funds, while RIAs utilise funds and ETFs more evenly,” says Frank Polefrone, senior vice president, Access Data, Broadridge.
 
Strategic Insight estimated net flows for these channels and found that, while all channels experienced growth due to market appreciation, the mix of net investor demand between funds and ETFs differed across market segments. The aggregate IBD channel, for example, led net inflows to mutual funds over the first nine months of 2013 – attracting USD64bn of net commitments. Within ETFs, the RIA channel displayed the strongest demand with roughly USD30bn of net inflows to ETFs in the YTD period ended 30 September 2013. Flows to actively managed funds were led by emerging markets equity, multi-asset allocation funds and the burgeoning liquid alternative space. US equity strategies have been a primary driver of net investor demand within ETFs.
 
“While, in general, we continue to witness increasing use of mutual funds and ETFs together in investors’ and advisors’ portfolios; the characteristics of demand across different asset classes, distribution channels and even individual distributors can vary in important ways,” says Dennis Bowden, assistant director of US research at Strategic Insight. “Whether analysing the characteristics of active fund demand within important categories or the expanding presence of ETFs within the intermediary-sold marketplace, the ability to examine the nuances of these trends across channels is becoming more essential for fund and ETF managers.”

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