This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes product trends as of February 2023, including mutual funds, exchange-traded funds (ETFs), and separate accounts.

Highlights from this research:

• Total mutual fund assets fell 3.0% to $16.7 trillion during February, declining in concert with global equity and fixed-income indices. Net flows remain negative, and February’s total came in at just -$5.7 billion. Year-to-date, the vehicle has lost -$6.3 billion. So far during 2023, the major destinations of net flows into mutual funds have been intermediate core bond ($20.5 billion), intermediate core-plus bond ($13.6 billion), muni national intermediate ($5.9 billion), and multisector bond ($5.8 billion).

• ETF assets fell 3.4% to $6.7 trillion in February. U.S. equity (-2.4%), international equity (-1.4%), and sector equity (-14.6%) ETF asset classes have seen declines in total assets during the last 12 months, while the taxable bond (5.5%) and municipal bond (26.3%) asset classes both have witnessed growth. ETF net flows slowed to just $2.3 billion, much lower than the previous five-month average of $52.8 billion per month.

• As strategies such as direct indexing grow in popularity, advisor-reported use of separate accounts is expected to grow 20% by 2024 from current allocations. Across all channels, advisors currently allocate 62.9% of their average portfolio to active mutual funds, ETFs, and separate accounts. However, certain channels outpace the field in passive vehicle adoption. Over half (53.4%) of advisors who use ETFs are currently or planning to use the vehicle for investing in thematic strategies.