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Life Health > Annuities > Variable Annuities

Sub-Advisory Market Is Robust, FRC Data Show

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The subâ€advisory market last year rebounded to levels seen before the onset of financial crisis in 2008, achieving an all-time high of $1.7 trillion in assets, according to a statement issued Wednesday by Financial Research Corporation (FRC).

Lynette DeWitt, the firm’s director of subâ€advisory research, presented the findings on Wednesday at the Financial Research Associates 11th Annual Subâ€Advised Funds Forum in Boston, the statement said

“Subâ€advised products now represent 13.4% of the industry for mutual funds, and 42% for variable annuities,” DeWitt said at the forum. “These figures are up from 12.9% for mutual funds and 40% for variable annuities at yearâ€end 2009. In fact, market growth has been so strong that later this year we will be revising our 2015 forecast upward.”

DeWitt also said that a record high of some $120 billion in mandate changes occurred in 2010, with nearly two-third of that activity coming in the mutual fund space. Now, she said, “we see sponsor firms giving subâ€advisor changes of the last year time to settle in, and foresee the level of manager changes moderating in 2011.”

FRC maintains a 10â€year history of mutual fund and variable annuity subâ€advisory asset growth, according to the statement.

In her comments, DeWitt discussed several of the key trends in the industry over the past decade.

  • A 10% compounded annual growth rate in mutual fund assets
  • An 11% compounded annual growth rate in variable annuities
  • Greatest growth rate in sub-advised mutual fund assets led by corporate bond funds, international bond funds and international equities.

Looking ahead, DeWitt said: “We see the subâ€advisory market for the remainder of 2011 being a competitive environment, with performance pressure escalation, and broader market challenges. Toward the broader horizon, our view is of a market that will continue to grow along historic patterns, with relatively greater increases on the way for subâ€advised variable annuities.”


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