Passives to drive emerging markets revival

Emerging markets1Flows for emerging market passive products may recover more quickly than their active counterparts, meaning asset managers with competitive products can take advantage, according to a new report.

The latest edition of The Cerulli Edge, issued by wealth management analytics firm Cerulli Associates, notes emerging markets’ fortunes have finally reversed, with inflows beginning to increase following consecutive years of negative returns and en-masse investor outflows.

Still, markets remain volatile – as a result, the firm believes emerging market exchange-traded funds will be the primary beneficiaries of this renewed interest.

In addition to low fees, they offer highly liquid access to emerging markets, allowing investors to trade in and out easily in unstable periods. Cerulli Associates also expects further active emerging market fund closures moving forward.

Elsewhere, the report reveals inflows for alternative equity funds totalled €3.1 billion in February, a 31% year-on-year increase. Likewise, European bond funds denominated in U.S. dollars experienced a 55% increase in new flows, up from €807 million in February 2015 to €1.3 billion.

Moreover, as of February 2016, independent asset management firms accounted for 20.1% (€248 billion) of total European money market assets (€1.2 trillion), with the remaining 79.9% (€984 billion) held by bank- and insurance-owned asset management firms.

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