Alternative Product Structures and Advisor Education Will Prompt Greater Advisor Adoption

December 4, 2023 — Boston

While rising interest rate environment poses a barrier to advisor adoption, tailwinds for advisor use of alternative investments will continue to grow

This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes product trends as of October 2023, including mutual funds and exchange-traded funds (ETFs), and explores advisor allocation to alternatives amid a rising rate environment.

Highlights from this research:

  • Mutual fund assets ended October at $16.6 trillion, well below the July 2023 high of $18.2 trillion. The vehicle’s 2.9% monthly asset decline was dragged down by net negative flows of $79.1 billion. This equates to a -0.5% organic growth rate for the month.
  • ETF assets fell with broad equity and fixed-income markets during October, declining 2.4% to just less than $7.0 trillion. The drop in assets was mitigated to some extent by positive net flows of $30.4 billion during the month.
  • A rising rate environment will prove a barrier to advisor use of alternatives by making a wide variety of other exposures more attractive, but industry traction will continue via tangible steps forward. Product structures and advisor knowledge of alternatives have improved tremendously over the last several years, and a range of managers are heavily committed to distributing the exposures. Managers should continue to focus on the distribution of alternatives, but they also should ensure that risks brought by the rate environment are adequately disclosed. Focusing on the buildout and positioning of product lines over star exposures (e.g., consultative sales process) should benefit managers in the long term.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Monthly Product Trends, November 2023 Issue.

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