Filed Under:Life Insurance, Life Planning Strategies

Cerulli Report: Growth of Passive Mutual Funds and ETFs are Eroding Active Fund Market Share

Passive mutual funds and ETFs have eroded active mutual funds’ share of total fund assets during the last decade, but during the same period active mutual fund assets have more than doubled, a new report concludes.

Cerulli Associates, Boston, published this finding in the October 2011 edition of Cerulli Edge, a monthly report on U.S. financial services product trends.

In 2001, the report says, index mutual funds totaled $341 billion compared to only $83 billion in exchanged-traded funds. By 2007, the gap narrowed as index mutual fund assets grew to $809 billion and ETF assets jumped to $588 billion. By August, both index mutual funds and ETFs hovered around $1 trillion.

The report adds that large-cap stock mutual funds and ETFs now account for more than 46% of “core funds,” which exclude municipal bond, balanced, target-date and money market funds. (Core taxable bond ETFs and mutual funds exclude bank loan, high yield, emerging markets bond, world bond, multisector bond funds.)

Among the report’s other findings:

• Mutual fund assets hit a 2011 low in September at $7.4 trillion, but flows into mutual funds turned positive during the month after three consecutive months of outflows.

• Taxable bond funds garnered top flows among mutual funds in September, attracting $3.5 billion.

• Intermediate-term bond led mutual fund flows in September with just under $3 billion while world bond funds led year-to-date flows at 22.7 billion).

• ETF assets decreased by 8.7% in September, the worst month since February 2009 when they lost 8.8%.

• Taxable bonds garnered top flows among the ETF asset classes with just more than $5 billion in September, and displaced U.S. stock as the top asset class for YTD flows ($27.9 billion vs. $22.0 billion, respectively).

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