After gaining US$615 billion in net flows last year, the global mutual fund industry came back strongly in the first quarter of 2017, reaching nearly US$0.5 trillion in net new cash into long-term mutual funds and ETFs in Asia, Cross-border, Europe and the U.S.
Bond funds still led flow contributions, raising US$264 billion in net subscriptions during the first three months of 2017. Yet, equity funds rebounded sharply and captured US$142 billion of net new money in 1Q’17, the vast majority of which went to passively managed index funds and ETFs.
Actively managed long-term funds in the U.S. saw small net outflows this quarter. The U.S. distributors’ shift to fee-for-service and asset allocation models has driven players away from actively-managed, expensive funds. Nonetheless, well-established and high-ranking active funds have been able to gain new money.
Europe, including cross-border markets, led active fund net flows among all regions, collecting €137 billion (US$145 billion) in net subscriptions during 1Q’17, which represented an increase of 35% compared to 2016’s annual net flow gains.
Investors in Europe and cross-border markets continued to rely heavily on products that could generate higher income and minimise exposure to rising interest rates (amid gradual interest rate hikes from the Federal Reserve), such as flexible multi-sector and unconstrained bond, high yield bond, multi-asset income, and certain alternative investment funds. Select equity strategies also attracted demand.
During 1Q’ 17, local long-term funds in Asia attracted a strong US$90 billion in net flows, about 30% higher than the prior quarter’s result and nearly tripling the new money collected during the same quarter last year. Importantly, actively managed funds accounted for almost three quarters of total net flows or around US$65 billion (mostly in China), while the remaining US$25 billion essentially went to passive ETFs in Japan.
Hong Kong, Taiwan and Singapore, the three core cross-border markets in Asia, attracted a combined US$8.7 billion in net flows through largely Luxembourg and Ireland-domiciled cross-border UCITs funds during 1Q’17. This large improvement from 2016’s US$0.4 billion in net outflows represented the best quarterly inflows since 2Q 2014.