Adviser-Sold Fund Data Shows Strong Sales at Independent B/Ds

Long-term mutual funds in total attracted roughly $30 billion of net deposits via intermediaries during the second quarter of 2017, according to Simfund data shared by Strategic Insight.

Within that total, active funds encompassed approximately $18 billion of new investment.

The Strategic Insight data encompasses asset and net flow information, updated monthly, for roughly $11 trillion of open-end stock and bond mutual fund and exchange-traded fund (ETF) assets across more than 900 distributors and nine distribution channels.

During the second quarter, Strategic Insight finds taxable bond strategies led mutual fund demand within the intermediary space, attracting $29 billion of net inflows. Independent and regional broker/dealers (B/Ds) led net deposits to such funds, SI reports, contributing roughly $15 billion.

Beyond mutual funds, Strategic Insight reports exchange-traded fund (ETF) demand was dominated by adviser-sold avenues during the second quarter. Registered investment advisers (RIAs) contributed $30 billion of net inflows to ETF exposures and the broker/dealer channels, both wirehouses and independent/regional B/Ds, each deposited roughly $25 billion. International equity led ETF demand within each of the RIA, wirehouse and private bank channels.

Previous research from Strategic Insight shows ETFs hold only a small fraction of defined contribution (DC) retirement plan assets, but the ETF vehicle has finally found a point of entry into the DC market as an underlying investment within other vehicles, such as target-date mutual funds (TDFs). Strategic Insight researchers say the trend has been building for the last six to eight years, and among all 39 TDF providers analyzed, 17 now use ETFs as an underlying vehicle in some capacity. Still, overall ETFs account for only approximately 2% of the assets invested in the TDF market.

Looking forward, newer entrants and smaller managers are significantly more likely to include ETFs in their TDF funds, in trying to combat the scale-based pricing advantages of larger managers. Using ETFs in this way has not caught on with established retirement plan investment providers, however, as they have the capacity to create their own highly efficient indexed mutual funds and utilize them for core asset classes.