SI Report Sees Inflection Point for the Mutual Fund Industry

In 2009, investors withdrew $650 billion from money-market funds, but in turn contributed almost $900 billion globally to long-term funds across asset classes. 

“Equity and mixed funds led the way with $1.7 trillion in cash contributions, followed by almost $900 billion to fixed-income funds, mostly from the U.S., but with meaningful contributions from Asia.” commented Daniel Enskat, senior managing director and head of Global Consulting at SI.

The analysis noted that $60 trillion in cash is “on the sidelines earning near-zero yields,” and that demand for income yielding investments will benefit mutual funds.

Future Trends

Additionally, the report noted that Asia local long-term fund flows of $850 billion in the last five years were almost 10 times larger than in Europe, and Asia-attributable offshore flows of about $120 billion brings Asia almost on par with the US.  “In other words, Asia with only a fraction of U.S. assets under management and only about 5% mutual fund household penetration across the region (compared to close to 50% in the US) generated almost equivalent net flows,” according to SI.

Asia-Pacific is expected to surpass North America in terms of the number of high-net-worth investors at some point in the next three years, while different investment cultures, goals, and asset allocation frameworks “could result in a new era for wealth management in emerging markets with regard to portfolio construction and client segmentation,” noted SI.

SI said that global money managers are relocating CEOs to Asia, while Asian institutions see a “once in a lifetime” opportunity to take market share away from global competitors.  Additionally, the report cited a “rare opportunity” in the European fund management industry, which it said could benefit from hundreds of billions in net flows back to funds in 2010 as investors continue to cautiously shift back to equities and long-term investments.