Key Trends in Mutual Fund Innovation Beyond Traditional
Key Trends in Mutual Fund Innovation: Beyond Traditional Strategies Sonia Mata Senior Research Analyst sonia@sionline. com
Uncertainty, Volatility Drive Search for “Alternative” Ways to Invest 2
Close to Half of New Long-Term Open-End Funds Launched Year-to-Date are “Non-Traditional”
Rethinking the Traditional 60/40 “Balanced” Portfolio § The “Core” of Investors’ Portfolios increasingly Global and Risk Managed § Developed markets no longer the only anchor of the “Core”: Emerging Markets shift from the periphery towards the center § Changes in the Bond landscape drive shifts in the fixed income component § The new “cores” increasingly include allocation to Non. Traditional asset classes and may incorporate Non. Traditional Strategies
Post-Crisis Move Towards Portfolio Construction “Solutions” § US vs. International Exposure § Developed vs. Emerging Markets § Dollar vs. Non-Dollar § Traditional vs. Alternative Asset sleeves § Long-only fully invested vs. Incorporating Short Positions and Cash More complexity drives advisers to seek “solutions” in the form of Global Tactical Asset Allocation (GTAA) funds or single asset-class Absolute Return-oriented unconstrained Strategies.
Global Asset Allocation Funds Flow Pace Accelerates in 2012
GAA: Significant Presence in Top Selling Equity Funds over Trailing 3 Mths as of 5/2012
GAA also an Area of Vibrant Innovation
Pre-Packaged AA Funds Witness Accelerating Flow Pace, in Aggregate, YTD in 2012
Bond Fund Sales Explode in a Historically Low Interest Rate Environment
30 Yrs of Falling Interest Rates Drove Extraordinarily Dependable Bond Fund Performance in Many Market Environments; Prospect of Secular Shift in Trend Drives Wave of Innovation
Non-Traditional Bond Strategies: A Secular Innovation Theme though Flows Slowed after 1 H 11
EM Stock Investing: Still High Risk Aversion + Intermittent Spikes in Global Stock Market Volatility + Many EM Fund PMs Facing Capacity Limitations ----˃ Sparks Balanced EM Fund Innovation
Commodities Funds: Accelerating Flows Post-Crisis into ’ 40 Act Funds Providing Diversified Exposure; Budding Active, Long-Short Category
Newly Launched Equity/Hybrid Funds Gaining Flows: Evolving Themes § Global Flexible AA § Multi-alternative, Long-Short / Market-Neutral § Global Income-focused Equity and Multi-Asset § Diversified EM § Large-Cap US/Foreign Equity § MLP / Global Real Estate
New Active Equity/Hybrid Open-End Funds Gaining Traction
Types of New Bond Funds Gaining Traction § Short / Ultrashort Bond § Flexible Global Bond § Floating Rate Loan § High Yield Bond § Intermediate Investment Grade § Emerging Market Debt
Successful New Active Bond Open-End Funds
Appendix
Top 10 Selling Active US Equity/Hybrid Funds over Trlg 3 Mths - Prominent Themes are Large-Cap, Relatively Concentrated Style Box Portfolios; Income-focused Stock and Multi-Asset
Top 10 Selling Active Intl/Glbl Equity/Hybrid Funds 3 Mths-5/12: GAA and Diversified EM Equity are Prominent Themes
Top Selling Active Open-End Bond Funds over 3 Mths-5/12
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