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Global ETP assets rose to US$30 trillion in 2014: Morningstar report

AT the end of 2014, global open-end and exchange-traded product (ETP) assets stood at nearly US$30 trillion, up from US$27 trillion in 2013, said independent investment research provider, Morningstar, Inc.

Its third annual Global Flows Report examining worldwide 2014 mutual fund and ETP asset flows said net inflows totalled a record US$1.3 trillion, compared with less than US$1 trillion in 2013.

Global equity funds accounted for about a third of these inflows at US$439 billion.

Said Alina Lamy, senior markets analyst for Morningstar: "US equity markets posted respectable returns in 2014, but most other global markets did not fare as well. Economic headwinds in Europe diminished returns for equity investors in that region, while the appreciation of the US dollar negatively affected US investors in funds domiciled in other countries.

"If 2013 was the year when investors finally regained confidence in worldwide equity markets, 2014 seems to have been a year dominated by interest rates. As the search for yield becomes ever more challenging in the global fixed-income space, investors still appear to value the lower volatility of bonds. Despite extremely low yields, fixed-income funds collected US$371 billion."

The report said for fund investors in Asia, it is worth placing a greater emphasis on flows going into European domiciled funds. It added that fund investors in European domiciled funds appear to be more cautious as they continued to prefer fixed income over equity. These investors also expressed a greater preference for allocation and alternative funds, with both categories having organically grown by more than 20 per cent over the past year.

"In fixed income, we see greater flows going into non-traditional bond funds. In the world of historical low government bond yields, asset managers have incubated products that seek to generate returns either by sector allocations, or alternative sources such as the loans market," said Morningstar.

Funds domiciled in Asia had the highest organic growth rate of all regions in 2014 at 12.8 per cent, it said.

Asian investors also invest heavily in cross-border funds (largely domiciled in the tax havens of Luxembourg, Ireland and the Cayman Islands), which grew by 10.4 per cent in 2014.

With estimated net flows of US$125 billion, Asian domiciled funds had total net assets hitting the US$1 trillion mark for the first time.