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Cerulli details US mutual fund and ETF losses over February


Latest research from Cerulli Associates reports that more than USD775 billion in assets were wiped out of mutual fund strategies in the US during February, representing a single-month decline of nearly 5 per cent. 

Despite the losses, both active (USD7.4 billion) and passive (USD7.8 billion) mutual fund strategies added net flows during February in the US. 

Cerulli writes that taxable bond mutual funds continue to be a destination for investors, having witnessed USD55.2 billion in net flows February YTD – the most of any asset class. 

In terms of ETFs, their assets plunged in February, declining nearly 7 per cent to USD4.1 trillion. The sharp drop is tied to the fact that most ETF assets (76 per cent) are in equity strategies, Cerulli says. Net flows into the vehicle remained positive at USD11.5 billion. 

The taxable bond category has significantly expanded its proportion of the US ETF industry over the last year (17.5 per cent last February) as advisers continued to increase their use of such ETFs. Moving into early March, equity market losses accelerated, ultimately falling more than 20 per cent from all-time highs, ending the 10-year bull market, writes Cerulli.

The elimination of non-transaction-fee (NTF) platforms in the US, levels the playing field and gives ETF issuers more options for promoting their products, Cerulli writes. 

“One consequence of the shift from NTF platforms will be the greater use of indirect revenue sharing, such as conference sponsorship and access to advisers for promotional purposes, as opposed to the previously more explicit inclusion in an ETF programme. Issuers entering the active ETF market should consider revenue sharing an integral part of their distribution strategy to ensure their products are approved and promoted appropriately.”

Use of asset allocation models is growing as more advisers are being prompted by their home offices to increase consistency of performance, spend more time on holistic wealth management, and focus more on client acquisition. Larger B/Ds and the wirehouses are seeking to bring on asset manager or third-party strategist model providers to help transition more advisers into fee-based business, Cerulli concludes.

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