This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes product trends as of July 2023, including mutual funds and exchange-traded funds (ETFs), and explores advisors’ use of structured notes as an alternative allocation.

Highlights from this research:

• A lack of liquidity is cited by advisors as a top challenge to investing in alternative investments, followed by the complexity of products making the due diligence process more difficult. Despite an elevated rate environment, just under one-third (30%) of advisors who reported allocating or planning to allocate to alternative investments either currently use or plan to start using structured notes in their practice. An additional 26% of financial advisors previously have used structured notes but report they are not using them currently.

• Total mutual fund assets climbed above $18 trillion for the first time since April 2022. While overall assets increased, net flows for mutual funds were negative in July, as $34 billion in net outflows from active mutual funds overpowered $8 billion in net inflows to passive mutual funds. Net outflows for mutual funds total $205 billion in 2023.

• ETF assets grew 3.7% in July, reaching nearly $7.6 trillion. ETFs continued their streak of monthly net inflows, gathering $56 billion during July to total $271 billion YTD and posting an organic growth rate of 4.2%. U.S. equity funds led inflows to ETFs in July with $26 billion, while taxable bonds took second place with $14 billion.