As regulators zero in on ensuring investors aren’t being soaked in fees, independent broker-dealers and wirehouses are abandoning actively managed funds and embracing passively managed ones and ETFs, according to new research by Broadridge.
“During the first half of 2016, net new assets for passively managed mutual funds increased by $37 billion, or 14%, for the retail distribution channels, while actively managed funds were down by $24 billion, or 0.6%,” Frank Polefrone, senior vice president of Broadridge’s data and analytics business, said Thursday in releasing results from the firm’s most recent Fund Distribution Intelligence research.
During the first half of 2016, net new assets for passively managed funds and ETFs increased by 9% and 1% for IBDs and wirehouses, respectively, the research found.
Noting the Securities and Exchange Commission’s recently announced sweep of BDs’ and advisors’ share class picks, as well as heightened fiduciary rigor under the Department of Labor’s fiduciary rule, Broadridge expects “growing use of passively managed funds by advisors, along with the increasing popularity of ETFs to continue to accelerate.”
According to Broadridge, the bulk of the $35 billion of net outflows from actively managed mutual fund accounts held at IBDs moved to ETFs, which recorded an increase of net new assets of $34.9 billion.
The shift to passive ETF products by IBDs increased the overall share of passive products from 19.5% at the end of 2015 to 21% of total fund and ETF assets managed by IBDs, the research found.