ETF Growth Outpace Mutual Funds During Q1 For First Time

ETF growth overtake mutual fund growth during Q1 2015 for the first time in four years.

Exchange Traded Funds (ETFs) saw solid growth during Q1 2015, overtaking mutual funds for the first time in four years, according to a Broadridge (NYSE:BR) statement.

In particular, total growth in ETF assets sold through retail investment channels during Q1 2015 were up $267 billion YoY, compared with a growth of $255 billion YoY for mutual funds assets sold through congruent channels.

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As a result, total ETF assets sold through both retail and institutional investment channels increased by 21% over Q1 of 2014, or $379 billion, having reached $2.19 trillion. Registered investment advisors (RIAs) also continued to establish themselves as leading distributors of ETFs during Q1 2015, representing $472 billion in ETF assets. Alternatively, independent broker-dealers constituted $400 billion, with wirehouse firms soaking up $385 billion.

According to Frank Polefrone, Senior Vice President, Access Data, a Broadridge firm, in a recent statement on the metrics, “ETFs are gaining ground among retail distributors driven by a few key factors, namely their low cost structure, but also the fact that ETFs are used in asset allocation models, which are more prevalent among retail advisors.”

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“While mutual fund assets continued to grow in the retail channels, this growth was outpaced on an absolute basis by ETFs – the first time this has happened since we started tracking this data more than four years ago.” he added.

Mutual Fund Assessment

A look into mutual fund asset growth at Broadridge also painted a rosy picture, having grown 9.5% or $665 billion YoY in the Q1 2015, largely fueled by institutional channels. These include, banks, private banks, and trust companies, which collectively saw mutual fund assets grow by $410 billion, or 17%.

“The fact that mutual fund assets have grown more rapidly in the institutional channels versus retail channels over the past year is a new development. This shift is being driven by the increased use of passive mutual fund products, and reflects a higher concentration of passive products used in the institutional channels overall,” Mr. Polefrone reiterated.

Indeed, according to Gerard F. Scavelli, president, Mutual Funds and Retirement Solutions Group, Broadridge in a statement on the performance, “Our data not only provides insight into emerging distribution channels that present growth opportunities, but also gives fund firms visibility into their own market share. This intelligence allows firms to improve strategic decisions regarding distribution, product development, and sales and marketing to allocate resources effectively, and accelerate growth.”

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