While low-cost investments continue to gain ground, some active mutual funds are thriving south of the border
Canadian ETF inflows reached $2.7 billion in August, bringing year-to-date flows to $15 billion and total assets to $186 billion, according to a report from National Bank of Canada.
Equity ETFs led the way with $2.3 billion in creations, most of which went into U.S. investments thanks to a $1.4 billion inflow into the BMO S&P 500 Index ETF via an institutional trade. The BMO Low Volatility US Equity ETF brought in a sizeable $94 million.
After a strong showing in July, flows into fixed income ETFs cooled considerably in August, bringing in $148 million. National Bank said this was largely attributable to outflows from Canadian government and corporate bonds, preferred shares and high-yield credit.
(Some outflows from Canadian government and corporate bonds, however, were double-counted due to the BMO Aggregate Bond Index ETF gradually unwrapping its holding, the report noted.)
Commodity ETFs had inflows of $69 million, while multi-asset ETFs brought in $190 million. Nine new ETFs launched during the month, seven of which were multi-asset products with asset allocation, covered call or defined payoff mandates, the report said.
Active mutual funds still viable
A release issued by Boston-based Cerulli Associates on Thursday noted that, while low-cost investment vehicles have threatened actively managed mutual funds in the U.S., there’s still a market for the latter.
“Despite low-cost investment products waging a war of attrition on active mutual funds’ share of advisor assets, 37% of active mutual fund families with [US]$5 billion or more in assets under management (AUM) had experienced positive organic growth during the preceding five-year period ending 2Q 2019,” Cerulli noted in its release, citing research from a new report.
Cerulli found that half of “giant managers” — those with US$200 billion or more in active mutual fund AUM — grew organically over the past five years. They did this, Cerulli said, by “pursuing a brand-forward strategy.”
“Brand-forward firms are those that have solidly entrenched themselves in the minds of advisors and end-investors as indispensable partners,” the release said. “This has been especially important following the financial crisis, which rocked investors’ — and consequently advisors’ — faith in active management.”
Cerulli said 40% of large managers (with US$50 billion to US$200 billion in active mutual fund AUM) had positive growth over the same period, while one-third of mid-size and boutique managers grew. Of the latter groups, those that succeeded segmented advisor opportunities in independent channels, the report noted.
“Active fund families that have grown organically have shown that there is, in fact, a viable path to success,” Ed Louis, senior analyst at Cerulli, said in the release.
Source: Investment Executive