n 2005, sub-advised fund assets will be north of $680 billion, at least according to research from FRC
, John Benvenuto, senior consultant at the firm, told the MutualFundWire.com. In fact, the firm opines that sub-advised growth exceded industry growth as a whole.
For the last five years (ending December 31, 2001), sub-advised annual asset growth rate was 19.5 percent. Meanwhile, the growth rate for internally managed funds for the same period was 10.8 percent.
The firm fully expects this trend to continue. By 2005, $1 for $8 invested in a mutual fund will be handled through a sub-advisor. The ratio was $1 for every $10 in 2001.
The data is available in the fifth annual editon of FRC's "Sub-advised Mutual Fund Report: Building a Best-in-Class Family of Funds". The study also notes that the recent bear market has slowed overall asset growth for the industry. Nonetheless, sub-advised funds continue to gain market share during 2001; according to FRC, the sub-advisory niche captured approximately 25 percent of net inflows into U.S. equity and international equity objectives.
"Sub-advising is generating a lot of interest in the industry right now," Benvenuto reported. "More and more firms are looking at the open architecture approach. Sub-advising is taking off."
"And there is a growing acceptance of open architecture. The bigger firms are realizing that it is tough to be all things to all people. So a growth shop will hire a value sub-advisor. And that same shop will offer offer its growth strategy as an advisory service," he continued.
"In mutual funds, the growing evolution of distribution is sub-advisory. This is the fastest area of distribution in the business," the consultant contended.
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