Opportunities Remain for Active Managers Despite Overall Negative Flow Figures

June 29, 2020 — Boston

This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes mutual fund and exchange-traded fund (ETF) product trends as of May 2020. This issue also explores which asset managers are adding positive net flows despite overall negative net flow figures. The Special Coverage article discusses the potential impact of large ETF issuers proposing a revised classification system.

Highlights from this research:

  • As of month-end May 2020, total equity assets ($9.4 trillion) remained down 9.1% from year-end 2019. Active ($6.3 trillion) suffered larger declines in assets, down 10% since the end of the year vs. 7.3% for passive ($3.1 trillion). Net flows continue to diverge depending on management style, as active has suffered outflows of $144.0 billion while passive has added $15.7 billion. However, there are pockets of opportunity for active, with the top-15 active equity mutual fund flow gatherers accumulating $36.4 billion in net flows from January through May. Whether from a large asset manager with cross-asset-class capabilities or from a smaller specialist or boutique, there is indication of demand for active equity from investors, despite the overall flow figure being negative.
  • ETF asset growth surpassed mutual funds for the second straight month, climbing 4.7% in May versus 3.9% for mutual funds. Mutual fund assets topped $15.1 trillion during the month and ETFs settled just above $4.2 trillion. Net flows into both vehicles were positive, with ETFs adding $33.2 billion to $3.6 billion for mutual funds.
  • Reinvigorated by the troubles of the U.S. Oil (USO) ETF, a coalition of large issuers has proposed that exchanges use a revised classification system that pools the current ETF universe under an exchange-traded product (ETP) umbrella, further subdivided into ETFs, exchange-traded notes (ETNs), exchange-traded commodities (ETCs), and exchange-traded instruments (ETIs). The classification system will move approximately 4% of AUM into non-ETF categories. Cerulli agrees with the intentions of the large managers to safeguard the vehicle, positioning it as a safe method to access a variety of prudent market exposures; however, such a labeling system has the potential to stifle industry creativity, especially as some exposures that the ETF vehicle can offer have not yet been created or foreseen (e.g., defined outcome ETFs being a new exposure offered in the ETF vehicle that has recently taken off).

Note to editors

These findings and more are from The Cerulli Edge—U.S. Monthly Product Trends, June 2020 Issue.

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