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ETFs outgrew mutual funds in retail channels for the first time in Q1

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Total growth in ETF assets sold through retail investment channels surpassed that of long-term mutual funds for the first time last quarter, according to data released by Broadridge Financial Solutions via its Fund Distribution Intelligence tool. 

Over the past year, ETF assets sold through independent and wirehouse broker dealers, registered investment advisors and discount brokerage firms grew USD267 billion, while mutual fund assets sold through the same channels grew USD255 billion.

Total ETF assets sold through retail and institutional investment channels increased 21 percent over the first quarter of last year, or USD379 billion, and reached USD2.19 trillion.

"ETFs are gaining ground among retail distributors driven by a few key factors, namely their low cost structure, but also the fact that ETFs are used in asset allocation models, which are more prevalent among retail advisors," says Frank Polefrone, senior vice president, Access Data, a Broadridge company. "While mutual fund assets continued to grow in the retail channels, this growth was outpaced on an absolute basis by ETFs – the first time this has happened since we started tracking this data more than four years ago."

Registered investment advisors (RIAs) continued to be the leading distributors of ETFs in the first quarter of 2015, representing USD472 billion in ETF assets, followed by independent broker-dealers (USD400 billion) and wirehouse firms (USD385 billion).

Mutual fund assets grew 9.5 percent or USD665 billion year-over-year in the first quarter of 2015, largely driven by institutional channels. Banks, private banks and trust companies saw mutual fund assets grow by USD410 billion, or 17 per cent.

"The fact that mutual fund assets have grown more rapidly in the institutional channels versus retail channels over the past year is a new development," says Polefrone. "This shift is being driven by the increased use of passive mutual fund products, and reflects  a higher concentration of passive products used in the institutional channels overall."

Overall, long-term mutual fund and ETF assets under management from third party distribution channels increased to USD9.8 trillion in the first quarter of 2015 – up almost 12 per cent since the first quarter of 2014.

In the past year, ETF assets distributed in retail channels increased at more than twice the rate of ETF assets in institutional channels (USD267 billion and USD112 billion, respectively).

Banks showed the highest year-over-year increase in mutual fund assets under management on a percentage basis, rising 23 percent, or USD147 billion.

"Our data not only provides insight into emerging distribution channels that present growth opportunities, but also gives fund firms visibility into their own market share," says Gerard F Scavelli, president, Mutual Funds and Retirement Solutions Group, Broadridge. "This intelligence allows firms to improve strategic decisions regarding distribution, product development, and sales and marketing to allocate resources effectively, and accelerate growth."

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