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Monday, June 17, 2013

Alt Products Hit Wirehouse Crossroads

Reported by KP

The liquid alternative investment growth has slowed down in the industry, according to research recently released by the Money Management Institute (MMI).

The report, dubbed the Distribution of Alternative Investments Through Wirehouses Third Quarter 2012, based on data collected by the MMI and the consulting firm Dover Financial. It drills down on emerging trends on alternative investments that show a market sector in transition, including the ascendancy of fee-based programs.

Highlights of the report include:

The liquid alternative investment growth has slowed down in the industry. For the third quarter in 2012, the market segment is under 4% and 5% for wirehouses. The report indicates a 19% growth in traditional mutual funds and ETFs, while liquid alternative funds grew at much slower rate of 11%.

  In 2011, the total net flows into liquid alternative funds were $5.7 billion. By the third quarter of 2012, that number significantly decreased to $2.1 billion. ETF flows have been more popular than mutual fund flows because of the shift towards commodity and equity precious metals which are best structured through ETF products. 

Wirehouse liquid alternative ETF assets trending according the report. It indicates a 19% growth in wirehouse segment, meanwhile the industry is only 14%. The share of liquid alternative ETFs assets for commodity based strategies grew from 75% to 83% in 2012. 

The report indicates a trend in fee based rather than commission based.   This shift towards fee based business is based on the growth in market share for mutual funds and ETFs.

To summarize, the report released by the MMI indicates a slowing growth rate and net flows for the liquid alternative industry.  However, the wirehouse liquid alternative ETFs seem to be exceeding the industry averages. There also has been an increase in fee based business rather than commission based.  

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