This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes mutual fund and exchange-traded fund (ETF) product trends as of June 2024 and assesses the demand for custom model portfolios.

Highlights from this research:  

• Mutual fund assets increased $267 billion to $19.6 trillion on $38.5 billion of net outflows during June. Taxable bond and municipal bond mutual funds gathered $2.4 billion and $301 million of net inflows, respectively, while alternative funds were the only other asset class to collect flows, adding $48 million. Moreover, seven of the top-10 Morningstar categories by June net flows were fixed-income categories.

• ETF assets pushed past the $9 trillion mark on $89 billion of inflows in June, with help from positive market performance. U.S. equity ($42.8 billion), taxable bond ($24.5 billion), and international equity ($13.4 billion) led inflows during the month, while only commodities endured net outflows of $251 million.

• Nearly 60% of 2024 model portfolio survey respondents tell Cerulli that custom asset allocation model portfolios are a top-three most important initiative for their firm. Custom model portfolios account for approximately 30% of asset managers and third-party strategist asset allocation model portfolio AUM. While there is a plethora of off-the-shelf offerings now available, many broker/dealers (B/Ds), registered investment advisor (RIA) aggregators, and turnkey asset management platforms (TAMPs) want customizations related to open-architecture requirements, alignment to existing capital market guidelines/assumptions, or manager/fund preferences, among others. As this demand has manifested, more than half (55%) of asset managers say there is a large opportunity for custom models. Model providers considering custom asset allocation model portfolios must be prepared for a longer relative sales cycle, higher-resource spend, and input from the distribution partner on model construction. The juice often can be worth the squeeze, as custom model mandates can be very lucrative opportunities that may require fewer resources and commitment to sell to the individual advisor.