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Passive overtakes active in mutual fund and ETF assets: Cerulli Associates 


Research from Cerulli Associates in the US reveals that mutual funds shed USD70.6 billion of assets due to flows in December, though assets still grew by USD670 billion during the month due to strong market performance. 

Passively managed mutual funds were able to offset only USD4.1 billion of the USD74.7 billion of outflows from actively managed mutual funds during the month, Cerulli says. 

Total ETF assets grew 24.5 per cent in 2023, after seeing 10.6 per cent growth in the second half of the year. ETF assets grew USD439 billion in December, with USD128 billion attributed to net inflows. Passively managed ETF flows outpaced those of actively managed by USD100 billion, though actively managed posted a higher organic growth rate of 2.9 per cent vs. 1.6 per cent, respectively.

A variety of asset managers are looking to launch active ETFs, Cerulli Associates says. “While this is a natural step for many managers, the use of active exposures within the ETF structure, known for providing low-cost exposures advisers build themselves, still is in an early stage. 

“Managers should offer well-differentiated active products at a lower cost. With fixed-income exposures increasingly able to carry out their income objective and offer downside protection, alternative investment managers are finding a tougher sales environment. 

“Cerulli recommends they focus on the practice management benefits of using alternative investments when speaking with clients. With money market funds holding a record USD6 trillion and continuing to gather assets, Cerulli believes the exposures will be attractive to advisers as long as higher rates exist.”

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