As wealth managers undertake extra non-traditional funding merchandise, similar to energetic ETFs and liquid funds for different belongings, they wish to get extra help and choices from the asset administration trade. But many asset managers may not be protecting tempo with these wants, in accordance with a newly launched survey from the Cash Administration Institute and Broadridge Monetary Options, a know-how firm that focuses on monetary providers.
The survey discovered that 89% of wealth managers count on to see elevated allocations to energetic ETFs and different investments. Nearly all of asset managers agree with them, together with 92% who foresee elevated allocations to energetic ETFs and 85% who foresee elevated allocations to different belongings. But a spot nonetheless exists between the curiosity expressed in these funding choices by wealth managers and what many asset managers have within the pipeline.
Whereas quite a lot of asset managers have taken the lead in providing non-traditional funding merchandise, “It’s the second spherical that’s extra hesitant to come back in for a few causes,” stated Craig Pfeiffer, president and CEO of the Cash Administration Institute. “There’s a fairly excessive upfront price, not essentially {dollars}, however an upfront price to enter this area. The primary half is constructing out the distribution. The second half is creating competency in your group and in your distribution, and also you’ll see within the analysis that it makes reference to specialists. You’ll see quite a lot of dialog distributions, gross sales groups, competency and capabilities. This can be a comparable however very completely different area than conventional markets. And so I feel that’s triggered folks to be extra considerate about stepping into.”
MMI and Broadridge discovered that 74% of the wealth managers they surveyed need asset managers to make a better funding in product specialists for non-traditional automobiles, up from 38% who expressed that sentiment in 2023. Six out of 10 surveyed asset managers deliberate to comply with these calls, with the best emphasis being placed on alternate options, non-public markets investments and different non-traditional merchandise.
For instance, the survey confirmed that 89% of wealth managers plan to launch, add or increase direct/customized indexing merchandise for his or her shoppers. Nevertheless, 49% of asset managers indicated they don’t seem to be actively concerned with direct/customized indexing, and 60% of those that don’t at present provide a majority of these merchandise haven’t any plans to introduce them.
One other 51% of wealth managers expressed curiosity in asset managers changing current energetic mutual funds into energetic ETFs. Solely 35% of surveyed asset managers stated they’re planning such conversions.
Liquid fund automobiles for funding in alternate options had been one other widespread possibility amongst wealth managers, with 78% figuring out them among the many three prime fund wrappers for development potential. But solely 49% of asset managers indicated they’re providing or creating liquid funds for different investments.
“Once we checked out a few of the product buildings that had been actually resonating with asset managers by way of the place they’re creating vs. wealth managers by way of their most popular wrappers, we discovered a little bit of a disconnect there,” stated Tim Kresl, principal of distribution perception at Broadridge. “Each had been very targeted on the continued development of registered funds—interval funds, tender provide funds, what have you ever. However we seemed on the wealth administration neighborhood, and proper under registered funds, there was quite a lot of curiosity in liquid funds on the choice aspect. ‘How can I maximize liquidity, however nonetheless get entry to a few of these by their nature non-liquid funding alternatives?’ As a result of what they’re listening to from their shoppers is that regardless of how a lot cash they’ve, some liquidity continues to be essential. Whereas asset managers had been a bit of bit extra targeted on the non-public fund area.”
Nearly all of wealth managers (83%) additionally indicated they’d prefer to method non-traditional merchandise similar to energetic ETFs and different investments as built-in components of their general portfolio, not as standalone investments. Solely 65% of asset managers shared that imaginative and prescient.
The survey, which interviewed 175 MMI members, was performed in Could and June of this yr by MMI and Broadridge along with impartial market analysis agency 8 Acre Perspective. The respondents included 99 asset administration professionals, largely in distribution and distribution administration roles, 36 wealth administration professionals and 40 professionals from know-how and options supplier companies. Roughly 35% of the asset administration respondents had been from companies with $1 trillion or extra in AUM.
