ETFs Look to Become Investment Vehicle of Choice for Managers

October 3, 2023 — Boston

This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes product trends as of August 2023, including mutual funds and exchange-traded funds (ETFs), and explores ETFs presenting the largest opportunity for asset managers.

Highlights from this research:

  • Mutual funds shed assets due to both flows and performance in August, as asset levels dropped $464 billion during a month that suffered $45.8 billion in total net outflows. Active mutual funds continued their outflow streak, while passive funds took in marginal flows of $3.7 billion.
  • ETF assets declined 2.3% in August to $7.4 trillion. ETF flows, while positive in August, were lower than July, posting just $12.9 billion vs. $58.3 billion. Taxable bonds gathered a steady flow of $8.1 billion in August.
  • For the first time, ETFs are viewed by asset managers as the largest opportunity among investment vehicles, taking a lead over institutional separate accounts, which had been viewed as the largest opportunity. Most product development in ETFs is occurring in the transparent active wrapper, which appears to have won the battle over semi-transparent structures. However, opinions still stand that low-liquidity strategies such as small-cap equity will need to use semi-transparent structures to effectively reallocate throughout the year. Strategy replications across vehicle structures lead product development plans when compared to building out new strategies for several vehicles, including ETFs, separate accounts, and collective investment trusts (CITs).

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Note to editors

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

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