With many pundits suggesting that a major market drop-off is just around the corner, the newest edition of financial and market trend research from Cerulli offers a glimpse at the frightening and exciting year ahead.
On the upside, the January 2013 edition of The Cerulli Edge also shows some massive movement in the mutual fund and ETF space, providing some ripe opportunities for advisors and investors as other market instabillity begins to grow.
According to Cerulli's research, mutual fund assets increased 16.3 percent in 2012 and provided almost three times as much as their 2011 flows – a huge jump from $97.8 billion to $269 billion. Taxable bonds also showed a respectable but somewhat contained level of flows with $266 billion in traffic overall, including $50.1 billion in municipal bonds and $21.3 billion in balanced asset classes.
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At the same time, ETF assets jumped an impressive 27.4 percent with flows totaling $187 billion. U.S. stock ETFs were a particular winner among asset classes, taking in $54.8 billion.
However, the company's research does suggest that continued market volatility is prompting a serious call on the part of both retail and institutional investors to find portfolio solutions that can boost returns, subdue volatility and address liabilities.
Managers, looking to tame all that volatility and the rollercoaster effect it's having on investors' portfolios, are increasingly looking for product innovation to address the bumpy ride.
Third-party-distribution-focused managers, in particular, said they're most interested in alternative investments and their ability to reduce volatility and provide diversification in their portfolios. Managers surveyed also said they're interested in products offering risk reduction.
As always, demand for income was one of the main drivers for product innovation, with nearly one-quarter of asset managers saying that they'd like to see more creative offerings in the taxable bond market.
That demand was prompted in part by news that intermediate-term bonds brought in net flows of $112.3 billion in 2012, Morningstar's top flow-gathering category, with the majority of the big earners being fixed-income-focused-diversified emerging markets and conservative allocation.
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