Interest in Stocks to Grow in 2011

The mutual fund industry has benefited this past year from moderately improved investor confidence, rising stock prices, rapid fund innovation, and evolving leadership among fund managers, notes a new report.

According to the latest Executive Insight report from Strategic Insight, an Asset International company, worldwide, investors have net added nearly $1.8 trillion to their bond and stock funds since the beginning of 2009. Bond funds dominated net inflows over the past two years, and until recent weeks, but are projected to fall slightly in 2011 due to evolving interest rate expectations, the report said.  

Interest in stock investing is starting to recover, despite lingering economic and employment concerns for middle-income America. Annual new sales of equity funds recovered by 19% in 2010, but were still nearly 20% below their record pace in 2007.   

In 2011, new sales of stock funds are projected to expand further by about 20%, Strategic Insight predicts. The attractive valuations of many larger, globally diversified companies support the widening of demand for Large Cap stock funds in the U.S. and globally in 2011. The recent high returns of emerging market stocks underlie their secular appeal but demand for such funds may moderate in 2011 if inflationary forces and capital outflows cause stock prices in low-liquidity Emerging Markets to retreat.   

According to the report, as many financial advisers (FAs) continue to reassess their business models, a growing number increasingly engage in portfolio construction and are more interested in discretionary account management. In parallel, more FAs now seek to outsource the asset allocation decision to the investment manager, which is enabling a new generation of fund innovation.    

For many advisers and investors, more flexible stock and bond investments (including, but not limited to, Global Tactical Asset Allocation) are increasingly appealing themes, benefiting existing funds of this kind and triggering a new generation of recently launched ones.