ETFs continue to perform well and draw more assets than mutual funds to the point that Cerulli Associates is predicting that ETFs will surpass mutual fund in assets within the next 15 years.
Cerulli published its latest Cerulli Edge study, saying both mutual funds and ETFs had a positive first half of the year. The latter took in more than $70 billion in assets, which represented a 5% increase during the month, Cerulli said. ETFs ended the month with $7.3 trillion in total assets.
Mutual funds saw assets increase 4.1% during June, ending the first half of the year with $17.7 trillion in assets, according to Cerulli.
The trend so far points to ETFs outpacing mutual funds and eventually coming out on top in terms of total assets, according to Cerulli.
“The mutual fund assets have been increasing but they’ve been net negative flows,” said Matt Apkarian, associate director of product development for Cerulli Associates. “The only reason the assets have been increasing is because of positive market performance year-to-date.”
ETFs have experienced both performance increases as well as positive inflows of assets. The only mutual funds that have had positive inflows have been taxable bonds and municipal bonds, Apkarian said.
“What we attribute that to is the vehicle preference of ETFs and separate accounts by both retail investors and by financial advisors who drive most flows,” he said. “Financial advisors ... will continue to prefer the more customizable and tax advantaged vehicle structures over the mutual funds.”
However, Cerulli is predicting that the performance numbers will allow mutual funds to continue to grow in perpetuity.
"We expect that performance will allow mutual fund assets to increase overall, however … there will be more net redemptions then there will be flows into mutual funds for the foreseeable future,” Apkarian said.
Mutual funds remain particuly important in both retirement savings accounts such as 401(k) plans and separate accounts. In those vehicles, the taxability advantages of ETFs are not as relevant, Apkarian said.
“The one thing that could potentially kill the mutual fund is if ETFs were to take over as the vehicle of choice within the retirement accounts,” he said. “We don’t foresee that happening [and] there’s really no reason to think that will happen.”