According to new research from Boston-based consulting group Cerulli Associates, “mutual fund assets” in the US have dropped 0.2 per cent to $14.5 trillion as at April 2018.
The finding indicates the third monthly decrease in a row for the managed funds market.
By contrast, the US exchange-traded fund market increased total assets by 1.2 per cent over the same period.
The declining fortune of mutual funds, and rise of ETFs, is partly attributable to shifting demand from the financial adviser intermediary market in the US, according to the research.
For “affluent-focused” financial advice firms, Cerulli found that almost one third (29 per cent) of client assets are allocated to “passive strategies”, while “high net worth-focused” firms are the largest “adopters of ETFs”.
In addition, the demand for ETFs is particularly strong for “strategic beta” products, with the research finding that advisers anticipate their client portfolio allocations to funds that subscribe to this investment philosophy.
Interestingly, Cerulli said that despite this appetitie, the use of strategic beta ETFs may not mirror the intended use espoused by product manufacturers.
“Though ETF issuers tend to position strategic beta as a diversification tool and alpha generator, the primary reason financial advisors report choosing them is to mitigate risk in client portfolios,” said a statement accompanying the research.
