This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes mutual fund and exchange-traded fund (ETF) product trends as of June 2022, examines product development initiatives focused on social-themed funds, and explores rising demand from nonprofit clients for outsourced chief investment officer (OCIO) services.

Highlights from this research:  

• Mutual fund assets have declined more than 20% during the first half of 2022, while ETF assets have declined by less than 15%. Mutual funds suffered their sixth straight month of net negative flows to start 2022, having lost more than $400 billion. Net flows for ETFs have been primarily positive during the first half of the year ($292.1 billion), having endured just one month of outflows in April.

• COVID-19, gender discrimination, and racial inequality have been catalysts for investor interest in funds that target and invest in companies with policies promoting diversity, equity, and inclusion (DEI). Asset managers’ product development of registered funds that address social themes has expanded beyond community development and gender equality to address other dimensions of diversity, such as racial justice and advancing equality in the LGBTQ+ community. Cerulli expects social-themed funds to remain at the forefront of asset managers’ product development rosters, as these issues are top of mind for an increasing number of investors and as more robust and transparent data around social issues becomes available.

• Nonprofit clients are seeking out outsourced chief investment officers (OCIOs) at a higher-than-historical rate for a variety of reasons, including the inability to access high-quality private investments and a desire for a strong environmental, social, and governance (ESG) policy. Cerulli expects to see OCIO platforms with strong ESG positioning in their private asset classes at an advantage when winning new clients in the nonprofit space. With their long-term investment horizons, nonprofits also are keen to include illiquid asset classes to increase overall returns. Overall, 79% and 69% of OCIO providers expect the demand for private equity and other private investments, respectively, to increase.