Share of Subadvised U.S. Mutual Fund Assets Shifting from Unaffiliated Single-Subadvisor to Multi-Subadvisor Arrangements

Share of Subadvised U.S. Mutual Fund Assets Shifting from Unaffiliated Single-Subadvisor to Multi-Subadvisor Arrangements


May 2018, BOSTON. New research from Cerulli Associates, a global research and consulting firm, reveals there has been a shift in the share of assets toward unaffiliated multi-subadvisor arrangements and away from unaffiliated single-subadvisor. Cerulli continues to feel that unaffiliated multi-subadvisor arrangements will be an area of high potential opportunity within mutual fund subadvisory.

“Unaffiliated multi-subadvisor assets have been growing at a faster clip over the last three years, with an 8.1% compound annual growth rate, compared to 6.1% for unaffiliated single-subadvisor arrangements,” explains Brendan Powers, senior analyst at Cerulli. “Removing subadvised index mutual funds from the analysis reveals an even more significant shift in assets toward unaffiliated multi-subadvisor funds.”

According to Cerulli, as of year-end 2017, actively managed subadvised mutual fund assets totaled $1.6 trillion. “Based on segmentation, unaffiliated single-subadvisor arrangements account for 56.4%, while unaffiliated multi-subadvisor and mixed multi-subadvisor account for the rest,” continues Powers. “This split becomes even more equitable, and may even start to favor multi-subadvisor arrangements, as you start to remove certain key unaffiliated single-subadvisor legacy relationships—relationships that are likely not addressable to subadvisors assessing takeover opportunities.”

“Subadvisors are confident about the prospects of multi-subadvisor mutual funds, with half of subadvisors surveyed indicating the arrangement will offer significant opportunity,” states Powers. Cerulli agrees with subadvisors’ optimism about opportunity within multi-subadvisor arrangements due to the impact of new distributor proprietary product and the potential for new and takeover mandate opportunities from traditional managers of managers. Subadvisors targeting this opportunity should be aware of potential challenges faced by increased fee pressure within multi-subadvisor arrangements and the need to be a complementary “fit” with other subadvisors’ strategies.

Cerulli’s latest report, U.S. Subadvisory Marketplace 2018: Shifting Product Use Drives a Changing Landscape, provides a comprehensive overview of the U.S. subadvisory landscape. The report highlights six emerging trends and opportunities and how these will impact the U.S. subadvisory market, reviews the perspective of subadvisors and sponsors on aspects of the subadvisory relationship, and sizes key segments of the U.S. subadvisory market.

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