Investors Flock to Fixed Income as Bond ETFs Reap Flows of Nearly $3.4 Billion in April

May 2016, Boston. The May 2016 issue of The Cerulli Edge - U.S. Monthly Product Trends Edition analyzes exchange-traded funds. The Monthly Spotlight examines product development opportunities and barriers with active taxable bond ETFs.

Highlights from this research:

• Mutual fund flows slid back into the negative ($3.7 billion) in April, as passive inflows ($16.6 billion) were not enough to offset active outflows (-$20.3 billion). Total assets did increase 0.7% for the month. ETF assets grew for a third straight month in April, increasing 1.7% to finish just greater than $2.2 trillion. Flows into the vehicle were positive, at $8.9 billion. Taxable bond ETFs continue to find demand among investors,

garnering flows of $3.1 billion in April.

• Active bond managers, once thought to be immune to the shift of assets from active to passive that their fellow equity managers have been facing, now feel similar pains as more investors are reallocating to index-tracking fixed-income funds. According to Cerulli data, 60% of advisors currently use taxable fixed-income ETFs, and another 16% plan to use these funds over the next 12 months.

• Asset managers expect manufacturing fees to compress at a faster rate than advice fees and are looking for methods to capture a portion of the advice fee. The increasing prevalence of asset managers offering digital advice platforms to wealth management firms represents the beginning of these firms' efforts to try to capture a portion of wealth managers' value chain and fees. Providing technology to construct and manage portfolios helps to recapture lost fees by taking some from wealth management firms.

NOTES TO EDITORS:

These findings and more are from: The Cerulli Edge - U.S. Monthly Product Trends Edition, May 2016 Issue.

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