The buy-side, especially the newer and more innovative products, is having a great year so far, according to research by TowerGroup. Among the best performing products between 2003 and 2006 on a percentage basis were exchange-traded funds, 529 plans, and real estate investment trusts. Lagging behind these investment vehicles were hedge funds. TowerGroup sees continued high levels of growth in many of the newer buy-side products, especially those that meet specific needs in the market.
While 2006 was undoubtedly a good year for the buy-side across the board -- with total global buy-side assets topping US$51 trillion at year end -- new research from TowerGroup spotlights the significance of product growth coming from new asset flows. Among the star performing products between 2003 and 2006 on a percentage basis were exchange-traded funds (ETFs), 529 plans (US college saving accounts with tax benefits for parents), real estate investment trusts (REITs), and unit investment trusts (UITs). Trailing these was the much-hyped hedge fund industry.
TowerGroup notes that many of the fastest-growing buy-side products are also the newest and most innovative -- a trend that reinforces the company's belief that investment managers must continue to be innovative with product development as well as respond quickly to client demand and market opportunities.
In a new research report titled "State of the Buy-Side: Innovation is the Name of the Game in 2007," by senior analyst Matt Nelson of the TowerGroup Investment Management practice, TowerGroup examines segmentation of buy-side assets, recent product growth trends, and expectations for product growth in 2007 and beyond.
Nelson expects to see continued high levels of growth in many of the newer buy-side products, especially those that answer specific needs in the market -- such as the desire for low-cost beta and high-quality alpha, retirement and other goals-based planning, and absolute returns.
In the coming years, TowerGroup urges investment managers to think about the factors motivating consumer preferences and driving competing product development from insurance companies and retail brokers. Managers must prepare to meet investor needs resulting from the impending retirement of the large baby-boomer demographic segment and that generation's switch from wealth accumulation to decumulation, wealth transfer, and related estate planning. Such trends and a host of other issues concerning the baby boomers in particular present opportunities for innovation to meet demand.
TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world's leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit http://www.towergroup.com/ for more information.
Stay ahead of the news ... Sign up for our email alerts now