If you knew how different factors drive mutual fund flows, you could better predict future flows prospects for your product lineup. That's the idea behind a new offering from an investment research giant, which draws on the inaugural research paper in a new series. Watch for the giant to update the new tool later this year to tackle another flows nuance: distribution channels.
Yesterday, as 1,500 fundsters gathered in Washington for the 60th ICI GMM, Morningstar
chief product officer Tricia Rothschild unveiled Investor Pulse
. It's a tool for asset managers that pulls in flows data and helps fundsters predict where future flows will go and why.
Also yesterday, M*'s quantitative research team released
its inaugural Quantitative Analytics Quarterly
report, this time focusing on "What Factors Drive Investment Flows?" The report revisits a one-off report the team did back in 2015 and digs into the impact that 25 factors have on fund flows for domestic equity and fixed income funds (no ETFs included). (This is the same team behind new quantitative fund ratings that M* rolled out last June.)
The idea behind Investor Pulse, explains Ramsin Jajoo
, M*'s head of asset management solutions for North America, is to help fundsters look at both their own funds and competitors' funds "and assess what investors really want." The tool already incorporates date for different share classes, and soon it will drill down into distribution channel data, too.
"The channel flow data is something that we're absolutely working on," Jajoo tells MFWire
. "We aim to have a solution out later this year. We're working towards fall."
Looking ahead, expect M*'s quantitative research team to add (and perhaps remove) some factors from their fund flows examinations, and the Investor Pulse tool will be adjusted accordingly.
So far, certain factors like lower fees and higher portfolio concentration remain consistently strong in correlating with higher fund flows. Strong performance (quantified with a five-star M* rating) continues to be highly correlated with higher flows, too, though not as strongly as in the past. And flows (as a percentage of a funds' assets) still favor younger funds, but not as strongly as in the past.
"Preference towards new funds has kind of pulled back," Madison Sargis
, associate director of quantitative research at M* and one of the authors of the report, tells MFWire
. (The report's other authors include: Lee Davidson
, head of quantitative research; Kayla Noguchi
, analyst; and Timothy Strauts
, director of quantitative research.
"Poor-performing funds are still being punished," Sargis adds. "The punishment of poor performance is higher than the benefit of being a strong performer."
Looking ahead, watch for M*'s quantitative research team to use the new Quantitative Analytics Quarterly report series to dig into other topics, like ESG-related factors and risk model factors. Yet they will definitely return to fund flows factors down the line, too, Sargis says.
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