Broadridge: Shift from Active to Passive Investment Products Up in H1 2016.

Independent broker dealers (IBDs) and wirehouse firms experienced net asset outflows of two percent for actively managed mutual funds in the first half of 2016, according to data released today by Broadridge Financial Solutions via its Fund Distribution Intelligence.

We expect the growing use of passively managed funds by advisors and the increasing popularity of ETFs to continue to accelerate.

Summary of Main Findings

Most 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, senior vice president of Broadridge’s data and Analytics Analytics Analytics may be defined as the detection, analysis, and relay of consequential patterns in data. Analytics also seeks to explain or accurately reflect the relationship between data and effective decision making. In the trading space, analytics are applied in a predictive manner in an attempt to more accurately forecast the price. This predictive model of analytics generally involves the analysis of historical price patterns that are used in an attempt to determine certain price outcomes. Analyt Analytics may be defined as the detection, analysis, and relay of consequential patterns in data. Analytics also seeks to explain or accurately reflect the relationship between data and effective decision making. In the trading space, analytics are applied in a predictive manner in an attempt to more accurately forecast the price. This predictive model of analytics generally involves the analysis of historical price patterns that are used in an attempt to determine certain price outcomes. Analyt Read this Term business, commented: “During the first half of 2016, net new assets for passively managed mutual funds increased by $37 billion, or 14 percent, for the retail distribution channels, while actively managed funds were down by $24 billion, or 0.6 percent."

"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 percent at the end of 2015 to 21 percent 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.

Background

Broadridge’s Fund Distribution Intelligence comprises comprehensive sales and asset data collection in the industry, creating transparency into more than $9 trillion of long-term mutual fund and ETF assets across a majority of mutual fund distributors.