This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes mutual fund and exchange-traded fund (ETF) product trends as of November 2021, assesses the growing demand for fixed-income offerings and new thematic products, and explores rising interest in direct indexing.

Highlights from this research:  

• Total mutual fund assets sit at $20.4 trillion as of month-end November, a 1.9% decline from month-end October. Net flows were limited, but positive at $1.5 billion. Total ETF assets declined by nearly 1% during November, although assets remain slightly above the $6.9 trillion threshold.  In terms of net flows, ETFs added nearly $80 billion during November and now have accumulated $794.5 billion YTD.

• The growth in number of indices has been driven primarily by fixed-income product expansion and new thematic products being brought to market. Practices with a higher concentration of high-net-worth, female, or younger clients typically represent a more optimal environmental, social, governance (ESG) distribution opportunity due to the greater potential for ESG use. Thematic strategies make up nearly one-fifth of the new product plans in U.S. equity over the next 12 months, largely in the ETF space. Just over one-quarter of advisors (26%) report planning to use thematic ETFs.

• As the opportunity for direct index separately managed accounts (SMAs) to move downmarket increases, managed account sponsors have taken notice. One-third (34%) of managed account sponsors rate direct index SMAs a priority in 2021—up from 18% in 2020—which places the product category in fourth place, behind income solutions in order of prioritization. Considering all these factors, Cerulli anticipates that the market for direct index solutions will increase 89.1% from 2021 to 2026, rising from $407.5 billion to $730.5 billion. In contemplating the opportunities for direct indexing, half of managed account sponsors (48.4%) rank tax optimization the highest opportunity, followed by tax transitioning (35.5%) and ESG (16.1%).