More Than Half of U.S. Asset Managers Look to Create ESG Investment Solutions

More Than Half of U.S. Asset Managers Look to Create ESG Investment Solutions
Thoughtful implementation of ESG investment principles are a valuable tool in conversations with advisors

May 2019, Boston—This issue of The Cerulli Edge—U.S. Monthly Product Trends Edition analyzes mutual fund and exchange-traded fund (ETF) product trends as of April 2019. This issue also includes special coverage on environmental, social, and governance (ESG) trends.

HIGHLIGHTS FROM THIS RESEARCH:

A 2018 Cerulli survey revealed that more than half of asset managers (55%) were looking to create ESG investment solutions. As active asset managers fight to win assets amid increasing flows to passive products, thoughtful implementation of ESG investment principles can give active managers a valuable tool in conversations with advisors. Wealth transfer between generations will place a greater percentage of investable assets in the hands of younger investors, who view ESG investing more favorably than past generations.

In a recent Cerulli survey, 42% of sponsors said the use of ESG factors is not important to them when choosing a subadvisor, though that number has trended downward from 69% last year. To bolster adoption in the subadvisory channel, the first critical driver is more explicit demand from the end-clients. Cerulli believes that one of the most critical factors in getting a seat at the table—other than performance and demonstrated capabilities, which will likely be derived from quantitative screens by the sponsor—will be the value-add services that subadvisors provide their sponsors.

Mutual funds have witnessed assets climb more than 13% off of December 2018 year-end lows, and total assets top $15.3 trillion as of the end of April. The vehicle has gathered more than $95.7 billion in positive net flows YTD. Total ETF assets are nearing $4 trillion, up 15.6% since year-end 2018. Most of the recovery has come as equity markets rebounded during the first four months of 2019, and net flows into the vehicle totaled approximately $85.2 billion (organic growth of 2.5%).

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