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Monday, February 01, 2016

2015 Was a Pretty Pivotal Year in the Mutual Fund Biz

News summary by MFWire's editors

"Last year was a pretty pivotal year," in the asset management business, Jeff Levi, partner at Casey Quirk, tells MFWire.

Jeffrey Levi
Casey Quirk
Partner
Here's how. 2015 was the first year, post-financial crisis, that the worldwide asset management industry's AUM, revenue, and operating margins all fell: to $65 trillion, $309 billion, and 32 percent, respectively.

Levi says that the Casey Quirk folks predict net new flows in the "1.5 to two percent range going forward" overall, with retail asset management flows being slightly better. He also sees "a lot more growth in separate account asset management", even for individual investors, thanks to broker-dealer home-office platforms.

Several new reports draw attention to a different aspect of the industry's dramatically shifting circumstances. The Wall Street Journal reports that "the cost of investing is tumbling toward zero for some basic portfolios," highlighting fee cuts by some of the big low-cost fund families (mostly in passive mutual funds and ETFs). Morningstar's John Rekenthaler takes the argument a bit further, writing that that "mutual fund investors' willingness to pay fees is tumbling toward zero."

"As a result, most existing funds have become dinosaurs," Rekenthaler writes. "They do not and cannot sell new shares, unless they are one of the very few to post unusually strong returns. All assets flow to the minority of existing funds that have low expense ratios (that is, index funds and institutional share classes), and to newly launched funds that sell on the cheap."

Rekenthaler even wonders if this fee crunch will spread to financial advisors' fees (and investors' willingness to pay such fees).

For fundsters who want to dig deeper into the shift, both M* and the WSJ offers more information and numbers. 

Edited by: Neil Anderson, Managing Editor


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