Among the highlights in the report:
Strong demand for mutual funds persisted through Q2’15, as investors globally poured a net US$390 billion into long-term mutual funds, increasing the aggregate net flows estimated over the first half of this year to exceed US$820 billion.
Mixed and multi-asset funds saw US$225 billion in net flows during Q2 and US$341 billion in 1H. Notably about half of the Q2 flows came from new mixed fund launches in China, as demand for these new funds was fuelled by the roaring Chinese stock markets during 1H’15, as well as last year’s regulatory changes for mixed fund in China. Clearly recent weeks brought a reality check for Chinese investors, many of which are new to investing in stocks and in mutual funds.
The U.S. garnered US$212 billion in long-term fund flows in the first half of 2015, with equity funds (globally diversified funds dominated net demand in the U.S.) collecting US$113 billion, bond products adding US$84 billion on flows during 1H’15. European investors contributed a net €95 billion to long-term funds in Q2, bringing the first half year’s aggregate result to €288 billion (US$322 billion).
Multi-asset funds, traditionally called balanced or mixed-asset funds, have a long and successful history. In the U.S., Strategic Insight’s Simfund database tracks over 2,000 multi-asset funds with nearly US$3 trillion in assets as of June 2015, almost double their AUMs five years ago.
European and Cross-Border multi-asset funds also stood out with an increased market share - collectively attracting €176 billion of net flows in the regions during the 1H’15 (representing roughly 60% of the €288 billion in total inflows to all long-term funds).
Geographically, investors in European and Cross-Border regions have shown some difference in choosing various types of multi-asset funds. In the U.K., Absolute Return Multi-Asset funds led the flow contributions, with six such funds among U.K.’s top 15 sellers in the multi-asset space over the past 12 months.
In Continental Europe, local investors prefer conservative allocation products, partly as a replacement of bank deposits and other guaranteed products –particularly as traditional bond funds have not continued to provide attractive yields. As a result, Mixed Conservative funds took in €67 billion in net new money over the past 12 months.
In the Cross-Border space, income focused Mixed Balanced and Mixed Flexible funds attracted €31 billion each in net flows during the trailing 12 month period, with a moderately higher risk tolerance. We observed certain distinctions between investors’ preference in Asia and Europe as regards of fund yield, risk, currency and choices of share classes, as well as income distribution frequency, etc.
The importance of the expanding asset allocation mindset for investors globally is greater than just evidenced in multi-asset funds, with equity and bond funds increasingly ‘wrapped’ with ‘balanced’ portfolios, as we have discussed, Japan for example is experiencing a rapid shift towards ‘wrapped’ models of fund distribution.
Recent months offered a reality-check to investors worldwide. Yet in your planning for the next year, and years, we believe the global mutual fund industry continues to benefit from $1+ trillion of new investment flows in most years. Two themes should lead. First, the increasing use of mutual fund investments to address the world’s shortfall in retirement savings. Second, in a globally interconnected financial world with persistent local and global uncertainties, and with always-busy lives of MNW and HNW investors, investing through an asset-allocation solution increasingly will dominate. How well your funds fit within such a solution (stock and bond funds, local and global, traditional and liquid ‘alts,’ active and passive, etc.) increasingly would map your path to success.