Amid the various economic and political uncertainties in 2016 and beyond, including Federal Reserve’s interest moves, the U.K.'s “Brexit” vote and the U.S. presidential elections, investors have been overall cautious on their fund purchase activities. During the first three months in 2016, equity, bond, multi-assets and other alternative funds took in merely US$63 billion in net flows, about one-seventh of the amount collected during the same period last year.
Driven by the increasing investors’ need for safety and income amidst market volatility, bond funds and “other” products (including alternative, absolute return, real estate and guaranteed funds) each attracted approximately US$65 billion in net flows during Q1’16, which more than offset the net redemptions out of equity and mixed funds.
Four out of the five best-selling investment categories during Q1 in Europe and cross-border regions belonged to “other” type of funds, with Alternative, Absolute Return, Commodities and Real Estate programs collectively attracting €30 billion in net investor money.
AUM of alternative UCITs increased by 145% during the last five years to reach €435 billion as of March 2016. Three largest alternative strategies together grabbed nearly three quarters of a total of €198 billion in trailing three-year net flows, with Absolute Return Multi-Asset taking the lead at €73 billion, followed by Long/Short (€40 billion) and Alternative Multistrategy (€34 billion).
During Q1’16 in Europe and the cross-border markets, Absolute Return Multi-Asset topped the bestselling investment objectives (defined by Strategic Insight) with €9.5 billion in net flows, 30% of which went to Luxembourg-domiciled JPMorgan Global Macro Opportunities.
Net sales of northbound MRF funds has been gaining momentum as the March figure was more than ten times of the disappointing sales in January. The latest data even shows that April added another 700 million RMB in net sales, almost matching the entire Q1’16 result.
The recent and ongoing regulatory development around cross-border investment in Asia such as ASEAN CIS and ARFP could help the local mutual fund industry grow further in terms of both AUM and types of products, but international asset managers pay more attention to feeder fund and/or direct sales opportunities for a more affluent client base in the region.
Not only in Japan, fund managers in Korea are also actively seeking strategic partnerships with international managers to develop products and share know-how with each other.