Research Update on Mutual Funds and Shareholder Sentiment

Transcription

1 Research Update on Mutual Funds and Shareholder Sentiment Investment Company Directors Conference November 12, 2009 Amelia Island, FL Brian Reid Chief Economist

2 Overview Asset appreciation has lifted U.S.-registered investment company assets significantly. Fund inflows have generally been following standard patterns of a low-rate environment that is part of bull market in bonds and a recovering stock market. Outflows from money market funds have been large, whereas inflows to bond funds have been at record levels. Inflows to equity funds have been modest. Demand for actively managed domestic equity funds and broad-based domestic equity ETFs has waned. Investor sentiment and confidence has dropped considerably, particularly among investors who have a very low tolerance for risk. 1

3 Investment Company Assets Billions of dollars, * 7,815 7,248 7,248 6,687 8,626 9,523 11,183 12,997 10,349 11,747 UITs ETFs 2 Closed-End Funds Mutual Funds 1 * Data for mutual funds and ETFs are for September 2009, closed-end funds for June 2009, and UITs for December Mutual fund data exclude mutual funds that primarily invest in other mutual funds. 2 ETF data prior to 2001 were provided by Strategic Insight Simfund; ETF data include investment companies not registered under the Investment Company Act of Sources: Investment Company Institute and Strategic Insight Simfund 2

4 Net New Cash Flow into Stock, Bond, and Money Market Funds Billions of dollars, * Long-Term Funds Money Market Funds * Data are through October 21, Source: Investment Company Institute 3

5 Percentage of Mutual Fund Complexes with Net Inflows to Stock, Bond, and Hybrid Funds Percentage, * * Data are through September 30, Source: Investment Company Institute 4

6 Percentage of Mutual Fund Complexes with Stock, Bond, and Hybrid Fund Inflows and Outflows Net new cash flow as a percentage of total net assets by complex, 2009* 2009* * 2008 * Data are through September 30, Source: Investment Company Institute Small Fund Complexes ($5 billion or less) Large Fund Complexes (greater than $5 billion) 5

7 Flows to Taxable Retail Money Market Funds Related to Interest Rate Spread ( *) Percent of Total Net Assets 5 4 Interest Rate Spread 2 Percentage Points Net New Cash Flow * Data are through September Net new cash flow is a percent of previous month-end taxable retail money market fund assets and is shown as a six-month moving average. 2 The interest rate spread is the difference between the taxable retail money market fund yield and the average interest rate on money market deposit accounts. Sources: Investment Company Institute, imoneynet, and Bank Rate Monitor * -2 6

8 Flows to Equity Funds Related to Global Stock Price Performance ( *) Billions of Dollars Total Return on Equities 1 Percentage Points Net New Cash Flow to Equity Funds * -60 * Data are through September The total return on equities is measured as the year-over-year change in the MSCI All Country World Total Return Stock Index. 2 Net new cash flow to equity funds is plotted as a six-month moving average. Sources: Investment Company Institute and Morgan Stanley Capital International 7

9 Flows to Bond Funds Related to Bond Returns ( *) Percent of Total Net Assets Percentage Points Total Return on Bonds Net New Cash Flow -2.0 to Bond Funds * -5 * Data are through September The total return on bonds is measured as the year-over-year change in the Citigroup Broad Investment Grade Bond Index. 2 Net new cash flow to bond funds is plotted as a three-month moving average of net new cash flow as a percentage of previous month-end assets. The data exclude flows to high-yield bond funds. Sources: Investment Company Institute and Citigroup 8

10 Willingness to Take Risk Falls with Age and Has Varied Over Time Percentage of U.S. households by age of head of household; willingness to take above average or substantial risk Sources: Investment Company Institute tabulations of Federal Reserve Board Survey of Consumer Finances and Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey 9

11 Net New Cash Flows of Actively Managed and Index Funds by Investment Objective Billions of dollars, * 213 Index Active Domestic Equity 2008/2009* Foreign Equity 2008/2009* Taxable Bond 2008/2009* Municipal Bond 2008/2009* Hybrid 2008/2009* * Data are through September 30, Source: Investment Company Institute 10

12 Net Issuance of ETF Shares Billions of dollars, * * 1 Broad Based Domestic Equity * Data are through September 30, ETFs not registered under the Investment Company Act of Note: Data for ETFs that invest primarily in other ETFs are excluded from the total. Source: Investment Company Institute 11

13 Shareholder Favorability Percentage of mutual fund shareholders familiar with mutual fund companies, Very Favorable Somewhat Favorable Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey 12

14 Shareholder Favorability Rises and Falls with Stock Market Performance Sources: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey and Standard and Poor s 13

15 Shareholders Who Report Higher Risk Tolerance Had Smaller Drop in Favorability Percentage of mutual fund shareholders familiar with mutual fund companies; 2005, 2008, and 2009 Very Favorable Somewhat Favorable Below Average/No Risk Average Risk Above Average/Substantial Risk Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey 14

16 Most Important Factor Shaping Opinion Is Performance Percentage of shareholders familiar with mutual fund companies who indicate each factor is most important, 2009 Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey 15

17 Shareholder Confidence Has Declined Percentage of all mutual fund shareholders by level of confidence that mutual funds can help them meet their investment goals, Very confident Somewhat confident Not very or not at all confident Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey 16

18 Shareholders Who Report Higher Risk Tolerance Have Higher Confidence Percentage of mutual fund owning household by risk tolerance; 2005, 2008, and 2009 Very confident Somewhat confident Not very or not at all confident Below Average/No Risk Average Risk Above Average/Substantial Risk Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey 17