Ex-US active funds drive industry flows

Mar 6, 2014

The top 15 active houses worldwide attracted over half of industry inflows last year, proving size matters. Their growth was driven by income funds, equity, multi-asset and alternatives.

The world’s top 15 active fund houses attracted more than half of active inflows last year, driven by product sold outside of the US, finds new data – proving that in asset management, size matters.

US fund house JP Morgan Asset Management saw the largest inflow at $61 billion in 2013, more than twice that of second-placed BlackRock and Dimensional Fund Advisors with $27 billion each.

MFS, Goldman Sachs and Franklin Templeton also attracted more than $20 billion via actively managed funds globally, notes data provider Strategic Insight.

Encouragingly for Asia’s asset management industry, many of the fastest growing firms saw most flows from products sold outside of the US.

More than 60% of flows to JP Morgan, BlackRock and Franklin Templeton were sourced internationally. Overall, three-quarters of total flows to actively managed funds last year went to products ex-US.

But despite the numeric dominance of the big players, a wide range of firms running actively managed funds were among the highest cash-flow beneficiaries, including local providers, boutique specialists, third-party independents and in-house units of distributors.

“In a number of cases, managers benefited from the expertise of local and global sub-advisers,” says Jag Alexeyev, head of global research at Strategic Insight.

He stressed that sub-advisory was an important way for smaller boutiques to source money from international markets, noting that $5 billion of US net inflows at Boston-based John Hancock last year went to funds advised by Robeco Boston Partners, and almost $3 billion to funds advised by UK-based firm Standard Life.

Income was the dominant driver of flows to JP Morgan AM last year, with income products accounting for the group’s five best-selling funds outside of the US, and four of its top-five best-selling funds in the US.

Its Strategic Income Opportunities fund captured $10 billion in the US, while an absolute return multi-sector bond strategy in the Luxembourg-domiciled JPM Income Opportunity fund collected $3.6 billion.

Multi-asset income funds were also major contributors to JP Morgan AM’s results, as they were for other firms such as Schroder Investment Management, notably in markets such as Hong Kong.

Other leading fund managers also benefited from the demand for income products, especially income alternatives less correlated to traditional long-only fixed income.

Unconstrained, flexible, absolute return and other non-traditional bond and income funds now account for 13% of bond fund assets in Europe and cross-border markets, rising from 8% during the past five years, notes Strategic Insight.

Additionally, strong rotations into equity funds, multi-asset vehicles and alternative investment strategies supported the growth of many fund companies last year.

“Active and high-conviction investment management remains the cornerstone of the fund industry, especially outside of the US market,” added Alexeyev.

Actively managed funds accounted for nearly 60% of the total $1 trillion of net flows into funds worldwide last year. Passive strategies attracted $280 billion in the US last year, but only $45 billion in the rest of the world.