Editor's Note: Below is an excerpt transcribed from today's edition of The Macro Show with analysis from Financials analyst Jonathan Casteleyn. In it Casteleyn dissects three trends impacting the asset management business.
1. "you’re seeing a substantial shift out of domestic equity mutual funds"
"What you see here is the cumulative domestic equity mutual fund flows for 2018 in the light green line. It is setting new all-time lows.
Every single year we’ve put this together it tends to be a new year of record outflows for domestic equity mutual funds. What’s happening is the domestic large cap industry is still under substantial stress. People are moving out of mutual funds and into ETFs and cash."
2. "Flows to Passive Are Also Slowing in 2018"
"As markets have come down people are being more cautious. This is cumulative ETF flows for the industry. Last year was a record with ETF flows at $350 billion in that neon blue line.
We can see in the neon green line this year. We’re well below last year’s production. We’re currently at about $50 billion in new ETF flows. This time last year we were at $100 billion. So ETF flows are down by 50% so far this year.
So even though the BlackRock's, State Street's, and Vanguard's of the world still have a very growth-oriented business, the comp is declining even for passive so that gives us more caution overall for the asset management industry."
3. "Another trend we’re picking up on is global trends are more stable"
"So while domestic equity mutual funds and ETFs are having a slightly less good year, cumulative world equity flows are actually pretty stable. Here we are again. The green bubbles are this year’s numbers. We’re basically ticking along almost at last year’s number.
So basically managers that have emerging market strategies, have strategies in Europe or Asia are doing much better than the domestic equity managers. This is filtering throughout the entire asset management industry."