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Rating:Look Global Say Cerulli Analysts Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, June 01, 2012

Look Global Say Cerulli Analysts

Reported by Irene Park

Flows into mutual funds slowed in April and global opportunities are still worth pursuing. That is the takeaway from a new report released for sale yesterday by Cerulli Associates. Analysts at the Boston-based consultant used their May issue of the U.S. Monthly Product Trends Edition to also highlighted Morningstar's addition in April of a new asset class to mutual funds and ETFs.

Overall, mutual fund flows have slowed to $20.9 billion in April since reaching $44 billion in February, according to the Cerulli data. While actively managed mutual fund saw inflow of $21 billion, passively managed mutual funds saw an outflow of $384 million.

Sector stock funds saw inflows of $563 million in April and $4.7 million so far in 2012. Cerulli's analysts described sector funds as including all 13 non-style-based U.S. stock Morningstar categories and one category from the international stock asset class, global real estate.

Besides providing flow data, Cerulli analysts stressed the benefit of going overseas. For fund sponsors, globalization provides opportunities for foreign firms to subadvise U.S. mandates, where access to best-of-breed managers is the largest driver for hiring subadvisors.

The report highlights Vanguard's experience as a success story. The fee-focused crew in Valley Forge splits investment management duties for the International Growth Fund with U.K. institutional managers Baillie Gifford, M&G Investment Management and Schroders.

Such subadvisors provide access to overseas markets not otherwise accessible by U.S. investors.

International diversification can also help protect investors over the longterm from troubled economic times, contend Cerulli's analysts. That said, many investors may not be adequately diversified internationally.

The U.S.' share of global equity market capitalization has decreased to 43 percent in 2010 from 66 percent in 1985, according to a 2010 paper by Russell Investments that the issue cites. In addition, international equity mutual funds accounted for only 18.6 percent of long-term mutual fund assets as of the end of 2011.

The May issue also noted that commodity investments -- especially in gold -- through mutual funds and ETFs, has increased, growing 6.1 percent to $161.6 billion in the first quarter of 2012, compared with decreased assets in 2011. Investors seem particularly interested in precious metals, investing in funds that either invest in mining and exploration companies or provide direct access to the price movements of the commodities.

Gold still dominates precious metals investments, with many equity mining funds using gold in their fund names to benefit from the commodity's reputation as a safe haven. But ETFs for other metals like platinum, palladium, and silver grew at higher rates than gold in the first quarter. 

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