The managed account industry saw more than $150 billion in net flows in 2009, including $56 billion in Q4 of 2009, according to a recent Cerulli report. Those inflows and the market rebound brought the managed account industry back to where it stood in 2007.
Cerulli said that fee-based programs are capturing a larger share of assets from investors relative to the total mutual fund industry. Long-term mutual fund flows as a percentage of assets were 1.5%, while the managed account industry experienced flows of 3.1% (though managed accounts have a much smaller base of assets).
In Q4 of 2009, most types of programs recorded net flows as a percentage of 3% of assets—except for separate account consultant programs, which had outflows of $3.7 billion. Separate account programs suffered the most amid the market downturn because the market ups and downs exposed the inflexibility and lack of diversification of those programs, according to Cerulli. In addition, separate accounts have limited appeal outside the wirehouse channel, contributing to their slower pace of growth.
Cerulli expects most managed account programs, with the exception of separate accounts, to recover strongly with continued stability in the markets. The research firm is particularly optimistic about mutual fund advisory programs, which have the ability to provide diversification for clients at all asset levels, enabling successful adoption across almost every distribution channel. Nearly half of total no-load shares in 2008 were in mutual fund advisory programs, according to Cerulli, citing Strategic Insight, an Asset International company.
Furthermore, the individual retirement account (IRA) rollover market will help fuel growth in mutual fund advisory programs. Cerulli projects 401(k) distributions to grow through 2014, resulting in a reliable stream of assets entering mutual fund adviser programs via IRAs.
More information on The Cerulli Edge—Managed Accounts Edition is available at www.cerulli.com.