GLOBAL – The global fund industry may have shrunk three percent over the last three-years, but funds of funds worldwide have enjoyed a growth rate of 16%, according to new data from Cerulli Associates.
In 2002 alone, funds of funds received nearly 15% of global mutual fund inflows – one out of every seven dollars, and an all-time high. Last year, says Cerulli, the global funds of funds industry drew 15 billion dollars in net new inflows, despite losing an estimated 17% from market depreciation.
Worldwide, funds of funds now hold 235 billion dollars (201 billion euros), which although down from 254 billion dollars (217 billion euros) in 2001, still represents a three-year annualised growth rate of 16%.
One hundred and seventy eight billion dollars (152 billion euros) in fund of funds are domiciled outside the US, and international assets have expanded at a three-year compound annual growth rate of 18%. In 2002 , two-thirds of net new fund of funds business came from international markets.
The multi-management industry has fared less well. Assets dropped from 100 billion dollars to 89 billion dollars in 2002, and only 5.4 billion dollars (4.6 billion euros) in net new business flowed into institutional manager of manager mandates.
However, Cerulli believes that multi-manager products (manager of managers and funds of funds) will not be short-lived. “Embedded advice, affordable diversification, and access to foreign investments and managers will ensure the longevity of multi-manager products.” Cerulli cites Canada, South Africa and Australia as evidence of these trends.
The Boston-based research and consulting firm expressed the same opinion when it released figures for European multi-management in 2002 in March. Then it said: “Multi-manager products, comprising manager of managers vehicles and funds of funds, may not have escaped the bear market, but the overall trends favouring growth in the industry remain firmly in place.”