The Markets January 15, 2010

Bond Funds See Record Inflows in 2009

U.S. investors’ use of bond mutual funds reached record levels in 2009.
Reported by

Strategic Insight (SI), an Asset International company, announced that full-year 2009 inflows to bond funds (including traditional mutual funds and ETFs) hit an all-time record of $396 billion—an impressive number considering bond and stock fund flows have never before topped $300 billion in one year. If funds underlying variable annuities are included, bond fund inflows hit $425 billion in 2009, according to SI.

Stock fund flows, when excluding emerging markets, were only around $30 billion, which SI said demonstrated that while spiking stock prices worldwide are signaling economic recovery, investors in stock mutual funds remain cautious and ambivalent about the recovery. Emerging markets funds (diversified or single country) captured about $55 billion during 2009.

Altogether, long-term mutual funds (stock and bond funds and ETFs) saw total net inflows of $478 billion in 2009, led by taxable bond funds (net inflows of $324 billion) and international equity funds (net inflows of $75 billion). SI said a limited appetite for risk restrained demand for U.S. equity funds in 2009, resulting in net inflows of just $6 billion.

ETFs (including ETNs) saw net inflows of $114 billion in 2009, down from $176 billion in 2008, but more than twice that of traditional index fund flows, at $54 billion, up from $50 billion in 2008.

The average investor in stock funds earned a 33.6% return in 2009, while the average bond fund investor earned 16.9%. According to SI, those figures are asset-weighted, thus reflecting the experience of the average investor, not the “average fund.”

Stock and bond mutual funds (including ETFs but excluding variable annuity funds) ended the year with $7.8 trillion in assets.

More information is available at www.sionline.com.
The Markets January 15, 2010

Poll Finds Positive Money Managers

Fund managers polled late last year were significantly more optimistic about their business prospects than those surveyed at mid-year, according to Cerulli Associates.
Reported by

A Cerulli news release about its November 2009 Global Asset Management Survey said 72% of asset management firms predicted a greater than 10% hike in their assets under management for the full year—a sizable increase over the 16% who gave that answer in a May survey.

Cerulli said the more positive outlook rested on better-than-expected fund flows and a healthier investment climate. In particular, Cerulli said, respondents pointed to the corporate fixed-income arena as providing fertile “asset-gathering opportunities.”

In terms of product development, the managers pointed to multi-asset investing and the “threat from new products in the shape of exchange-traded funds and structured products.”

As retirement planning evolves, mutual fund penetration is set to rise in Asia, according to Cerulli. “But the recent tightening of distribution will have little to do with it and the gap for advice remains as wide as ever,” Cerulli pointed out.

“All the evidence seems to support the thesis that the global asset management industry has turned a corner,” said Barbara Wall, editor of the Cerulli Edge—Global Edition, in the news release. “While the squeeze on costs will force some firms to consider if asset management is still a core business, successful firms will continue to pursue a policy of strategic, disciplined investment in talent, product innovation, and distribution.”

More information is available at www.cerulli.com.

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