Mutual fund and ETF asset growth projected to decline

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ISS Market Intelligence predicts that long-term fund assets will increase by 7.4% each year over the next five years, down from an average of 13.1% over the five years to this year.

The research group estimates that investment trusts and ETFs will add $ 11.7 trillion to assets under management, and collective assets will increase to $ 39 trillion by 2026.

However, ISS Market Intelligence expects cooler markets to slow down annual asset growth. Capital appreciation is the driving force behind the largest asset growth ever, accounting for about 70% of asset growth over the last five years. But over the next five years, the market can account for only 60% of asset growth.

Christopher Davis, Head of US Fund Research at ISS Market Intelligence, said: “This is a potential opportunity for managers with proper distribution and product capabilities, but it is also a potential danger for managers struggling to grow organically.”

This article was previously published Ignite, Titles owned by FTGroup.

Over $ 1 trillion has flowed into long-term funds this year, but three of the ten largest fund managers have experienced net outflows, Davis said.

In the year to the end of November, investors withdrew $ 29.7 billion from T Rowe Price’s investment trusts and ETFs, $ 13.1 billion from Franklin Templeton, and $ 13.9 billion from Dimensional Fund Advisors, according to Morningstar Direct.

“Without a tonic for a fast-growing market, managers would rely heavily on sales and distribution capabilities to drive growth,” the report said.

The ISS Market Intelligence report is based on forecasts of returns and volatility from 25 banks, asset managers, consultants, and family offices. According to Davis, this report is intended to be used as a strategic long-term planning tool for asset managers.

Similar results were obtained in an analysis by another research group.

Tyler Croherty, senior manager of Deloitte Unit, said Casey Queen’s capital market and flow forecasts are slightly different, but the “directions” are similar.

ISS Market Intelligence predicts that ETFs will continue to grow rapidly, rising from 25% of long-term assets to around 33% in 2026. Zero commission trading, more use of more common online securities, and product innovation will drive the product.

“After a slow initial rise, Active Equity ETFs will gain traction and contribute $ 325 billion to $ 590 billion across active ETF flows over a five-year period,” the report said.

According to ISS Market Intelligence, long-term investment trusts will draw about 25% of the industry flow over the next five years. They will receive about $ 1.5 trillion by 2026, and active fixed income funds will probably win the largest chunk of these new assets.

“The aging population will continue to benefit bond fund sales,” the report said, as retirees want more income and less risk. Bond funds and ETFs are expected to generate approximately $ 3 trillion (more than half) of net sales by 2026, according to an ISS report. This is almost twice the amount such products have collected in the last five years.

Index products continue to grow at a fast pace, but the report states that they will grow primarily through ETF chassis.

ISS Market Intelligence predicts that index funds will probably “exceed the 50% threshold by 2024,” rising from 44% in mid-2021 and holding a 53% market share by 2027. ..

* Ignites is a news service issued by FT Specialists for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends.Trials and subscriptions are available at ignites.com..

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