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Where Investors Worldwide Are Placing Their Bets

This article is produced by Morningstar, authored by Alina Lamy and published on 14th March 2017.   Read the original article here.

Our analysis of global asset flows in 2016 finds that investors embraced bonds, favored passive products, and sought low-cost options.

The Morningstar 2016 Global Asset Flows Report analyzes the flows that investors placed in global open-end funds and exchange-traded products during the past year and what these trends reveal about past performance, as well as investor behavior and expectations going forward.

 

Asset Flow by Region: US Attracted $288 Billion

The United States attracted $288 billion in new flows in 2016, an increase from $260 billion in 2015. Europe, Asia, and Cross-Border, however, saw their inflows diminish compared with the previous year. The fastest-growing region was Asia, followed by Africa, Canada, and Latin America.

” The fastest-growing region was Asia “

 

Asset Flow by Asset Class: Fixed Income $412 Billion, Commodities Grew 25.7%
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The pattern of flows by category group was very different from 2015. The category groups that received the largest flows in 2016 were fixed income and money market ($412 billion and $196 billion, respectively). In 2015, the top receiving category group was equity, with $346 billion, followed by allocation, with $167 billion. In terms of organic growth rates, commodities grew the fastest at 25.7%.

After favoring both U.S. and world ex-U.S. equity funds for three consecutive years, investors turned to fixed income in 2016. In a year that brought about Brexit and a surprising result to the U.S. presidential election, bonds were the investment of choice.

Investors might have been:

  1. looking for less risky assets
  2. trying to position portfolios in anticipation of rising interest rates
  3. selling off equities at the top of a bull market
  4. or all three.

 

Active & Passive Flows

In the U.S., the gap between active and passive flows has never been wider. U.S. index funds received $492 billion in 2016. Their active counterparts, in sharp contrast, saw $204 billion fly out the door.

The largest discrepancy between active and passive flows occurred in the equity category group, with $390 billion going into index funds and $423 billion oozing out of active funds. Fixed income, on the other hand, received inflows on both active and passive fronts worldwide.

 

Exchange-Traded Products (ETP)

ETP* assets continued to grow, reaching $3.6 trillion globally at the end of 2016. These types of products are becoming more and more popular in a climate where the high growth rates of years past are becoming legend and investors are increasingly sensitive to fees, to the point where they are dropping more-expensive funds and buying lower-cost options.

* ETP are products listed on a national exchange such as the stock exchange.  Example of ETPs are exchange-traded funds (ETFs), exchange-traded vehicles (ETVs) and exchange-traded notes(ETNs).

This article is produced by Morningstar, authored by Alina Lamy and published on 14th March 2017.   Read the original article here.



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