Figures out from Credo Consulting show that net inflows of ETFs stood at $5.4 billion during the first quarter of 2016 versus $4.6 billion a year earlier. But the Investment Funds Institute of Canada reported that mutual fund net new sales (close equivalent to ETF net inflows) sustained a stunning drop of well over 50 per cent. At the same time, assets of ETFs under management in the quarter are up about 100 per cent since the 2008 financial crisis to almost $100 billion. Frank Hracs, the Chief Economist at Credo Consulting told Financial Pipeline editor Malcolm Morrison that while ETFs have made big inroads, the managed mutual fund industry is still widely outpacing ETFs when it comes to balanced funds.
Malcolm: One interesting area where it doesn’t seem ETFs have made all that much of an inroad and where the classic mutual fund industry has managed to hold on, is balanced funds. It seems that the industry has still managed to keep a grip on that segment of the market.
Frank: Yeah that’s the big area of the mutual fund industry which you don’t maybe necessarily know about. About 55 percent of the mutual fund industry assets are in balanced funds and those are kind of notionally safe – stock, bonds, etc. international kinds of compositions. But the rest of the mutual fund industry assets – in a way that’s really what the ETFs are competing against so that part of the mutual fund area is actually struggling and the ETFs are doing even better than you would just think looking at overall numbers
Malcolm: That’s not to say that you can’t get ETF balanced funds.
Frank: there are a few and there are more of them coming where they are called fund of funds where you have a fund and in it say Bank of Montreal will have a fund and in it they might have half a dozen of the components or other Bank of Montreal ETFs so it’s just another packaging, if you will. Not everybody wants to have just one, say, equity fund or international equity or bond fund. They do like the package approach and if that’s something that’s going to be strong in the future we’ve yet to see that.