Funds Worldwide See $665B Inflow in 2013

This was despite net redemptions towards the end of the second quarter, according to Strategic Insight (SI), an Asset International company. SI data shows outflows from long-term funds in June exceeded $120 billion worldwide, though this represented less than 0.5% of assets under management.

The majority of cash so far this year has gone into funds outside the U.S., which have collected $360 billion on a net basis. Nearly three-quarters of this amount was absorbed by funds in Europe, including cross-border UCITS funds that are sold in markets worldwide.

Bond fund net redemptions in European and cross-border international funds were found to have reached 1.7% of total assets during June, similar to the levels experienced in the U.S. Equity funds; however, registered net redemptions of just 0.5% of assets. With stock markets recovering in July, cash flows should reveal an improvement. Historically, stock or bond fund redemptions driven by sharp price corrections have usually been limited in magnitude, short in duration, and non-recurring, SI said.

“The recent volatility will encourage investors and advisers to revisit their investment strategies, assess bond concentration risks, and consider reallocation opportunities—especially into selected equity programs and other diversification options. Absolute return and alternative strategies should also benefit in the near term,” said Jag Alexeyev, head of global research at SI.

Demand in Europe and Asia will continue to revolve around the major themes of recent months but with some shift in emphasis, SI said. Income vehicles, multi-asset, flexible and unconstrained allocation, nontraditional strategies, risk control and managed volatility, target maturity, and outcome-oriented products recently powered the gains for asset managers and will remain in demand, but sales of equity funds will also likely expand over time.

Overall the foundation of support for fund investments this year has been exceptionally strong, according to SI. Cash flows for some leading funds in the first quarter ran at more than double the monthly pace seen last year. Sales grew even further in April and May for a few, and even though June was a difficult month, flows in the second quarter were higher than the previous period for several flagship products.

Strategic Insight counts nearly 270 funds around the world that each captured at least $1 billion and as much as $13 billion during the first half of 2013.