Broadridge: Retail funds & ETFs increase slightly with IBDs experiencing largest move from active to passive


Independent broker dealers (IBDs) and wirehouse firms experienced net asset outflows of 2% for actively managed mutual funds in the first half of 2016, according to data released by financial technology provider Broadridge Financial Solutions, Inc. (NYSE:BR) via its Fund Distribution Intelligence. Much of the outflows of actively managed funds from broker dealers appeared to move to passively managed mutual funds and ETFs. During the first half of 2016, net new assets for passively managed funds and ETFs increased by nine percent and one percent for IBDs and wirehouses, respectively.

Frank Polefrone, Broadridge
Frank Polefrone, Broadridge

Frank Polefrone, senior vice president of Broadridge’s data and analytics business, said:

During the first half of 2016, net new assets for passively managed mutual funds increased by $37 billion, or 14%, for the retail distribution channels, while actively managed funds were down by $24 billion, or 0.6%. With pending regulatory changes related to appropriate share class usage and the Department of Labor’s new fiduciary rule, we expect the growing use of passively managed funds by advisors, along with the increasing popularity of ETFs to continue to accelerate.”

The bulk of the $35 billion of net outflows from actively managed mutual fund accounts held at IBDs moved to ETFs, which recorded an increase of net new assets of $34.9 billion. The shift to passive ETF products by IBDs increased the overall share of passive products from 19.5% at the end of 2015 to 21% of total fund and ETF assets managed by IBDs. The wirehouse channel experienced net outflows of $21 billion from actively managed funds, but only increased assets of passively managed funds and ETFs by $5.2 billion. As a result, wirehouses experienced net outflows of long-term funds and ETFs of $13 billion in the first half of 2016, and lost overall market share to other retail channels.

In the first half of 2016, overall net new assets for ETFs increased by 1.2% to $2.2 trillion. Of the $24.8 billion of net new assets, $22.5 billion, or 91% of the increase, came from passively managed ETFs. Net new flows for long-term mutual funds showed a similar pattern, with net new assets also increasing by 1.2% to $7.4 trillion of assets from third party financial intermediaries. Of the $84.7 billion of net new long-term mutual fund assets, $30.6 billion, or 36% of the increase, came from passively managed mutual funds.

Additional key findings include:

• Net new assets of ETFs for retail channels – RIA, IBD, wirehouse and discount B/D – were up by $61.3 billion in the second quarter, while net new assets for institutional channels – private bank, bank and trust – were down by $30.4 billion.
• Net new assets for retail long-term funds were up by $12.8 billion, while institutional long-term fund net flows increased by $71.7 billion.
• Net new assets of passive products for the retail channels increased across major US product categories – US large cap (+13%), US mid cap (+11.6%), and US fixed income (+20%).
• Net new assets of active products for the retail channels decreased for US large cap (-2.7%), US mid cap (-6.7%), US small cap (-0.4%) and increased for US fixed income (+5.7%), high yield income (+4.8%) and US municipal (+11.7%).

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Broadridge: Retail funds & ETFs increase slightly with IBDs experiencing largest move from active to passive

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