Multi-asset begin to shift to absolute return, increasing demand on ESG - Global Fund Insights

After a volatile first quarter of 2016, many investors were caught by surprise in 2Q as U.K. voters decided in June to leave the European Union in a referendum dubbed “Brexit”. Amid the various economic and political uncertainties in 2016 and beyond, long-term mutual fund flows globally slowed down to US$165 billion during the first half year of 2016, only achieving about 20% of the net flows garnered during the same period last year.

Driven by investors’ needs of safety and income, bond funds and “other” products (mostly absolute return, alternative, real estate and guaranteed funds) collectively garnered US$319 billion in net new cash during 1H’16, while equity and traditional mixed funds suffered US$115 billion and US$39 billion in net withdrawals, respectively.

Alternative and Absolute Return strategies topped the best-selling investment categories during 1H’16 in Europe and cross-border regions, collecting a respective €22 billion and €19 billion in net investor money.

More recently, Absolute Return focused products started to attract more demand and accounted for the majority of the total Multi-Asset fund flows collected in Europe and cross-border regions. Absolute Return Multi-Asset and Alt – Multistrategy were the only two Multi-Asset strategies that garnered inflows every month during the trailing one-year period.

The overall bestselling long-term fund during 1H’16 in Europe and cross-border regions was Nordea 1 - Stable Return Fund, an Absolute Return Multi-Asset product attracting more than €6 billion in net flows.

Another Absolute Return Multi-Asset fund, JPMorgan Global Macro Opportunities, which was the second bestselling active fund outside the U.S. during 1H’16, has greatly benefited the firm’s strong local presence across Europe and Asia, extensive distribution partnership network, as well as excellent product planning and execution capabilities. Although the fund raised the majority of its assets in Europe, Asian investors have also made significant contributions.

Recently, ESG funds have experienced renewed interest within Europe and the U.S. Fund selectors have increasingly put pressure on asset managers to adopt sustainable investment practices. This push stems from a growing appetite for ESG funds from retail investors, and company-wide strides to make progress on sustainability. It is notable that the development of ESG ETFs in the U.S is more clearly driven by millennials and women retail investors, who are more likely to factor sustainability.