New research suggests that mutual fund, variable annuity and retail separate account subadvisory business will boom to $3.3 trillion in two years, including $2.066 trillion in mutual funds alone. Yet the authors of the report, issued by Cerulli Associates, estimate that VA subadvisory growth is outpacing mutual fund subadvisory growth, by 7.8 percent compared to 5.9 percent.

The Cerulli team describes the mutual fund side of the subadvisory business as "a mature market in which the top sponsors and subadvisors control the vast majority of assets."

"Within this space, we expect multi-subadvised assets to outpace their single-subadvised counterparts, driven in part by the demand for diversified retail alternative product offerings among financial advisors," stated John Hsu, senior analyst and co-author of the new Cerulli Special Quantitative Update: U.S. Subadvisory Marketplace.

The report also highlights the top reasons for subadvisor mandate losses over the past four years. Number is performance problems, leading to 29.4 percent of mandate losses, followed by 24.8 percent for clients taking the mandate inhouse.

The Cerulli analysts based the report on a survey and on interviews with 30 executives. Other subjects examined include: sponsor due diligence process factors, greatest challenges for sponsors, and the percentage of subadvisor spent on different activities to keep their business. 

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