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Press Release

Active Managers Offer Institutional Funds to Reduce Fees, According to Broadridge Financial Solutions

Focus on lower fees drives the growth of institutionally priced active funds

LAKE SUCCESS, N.Y., February 1, 2018 – Institutionally priced funds gathered over $600 billion of net new fund flows in 2017, according to data released today by Broadridge Financial Solutions, Inc. (NYSE:BR).   At the end of 2017, 50 percent of actively managed institutional fund assets were from retail channels – registered investment advisors (RIAs), broker/dealers and online - with the remaining 50 percent from institutional channels – bank, private bank and trust.  The amount of retail assets invested in institutional funds was less than 37 percent at the end of 2012, but has steadily increased over the past five years.

The infusion of retail assets into institutional funds has been especially pronounced for registered investment advisors, with the RIA channel holding $850 billion in institutional funds at the end of 2017.  The RIA channel is also the largest channel for ETFs, with more than $923 billion.  The combination of institutionally priced actively managed funds, ETFs, and index funds has made the RIA channel the prime target for asset managers, with overall fund and ETF assets of $2.8 trillion at the end of 2017. 

“Active managers pushed back on index funds and ETFs in 2017 by cutting fees for actively managed funds, and introducing institutional shares for existing funds,” said Frank Polefrone, senior vice president of Broadridge’s data and analytics business. “The increase in fee based advisors across all retail channels, as well as the changing product demand by broker dealers, has created an environment where the only asset gains for actively managed funds in 2017 were from institutionally priced products.”

Actively Managed Fund Growth from Institutional Shares in 2017

Broadridge tracks over $12 trillion of ETF and fund assets across third party retail and institutional channels, and more than 30 percent of those assets are now allocated to institutionally priced funds. 

  • Over the past year, net new assets for institutional funds sold through third party distribution channels increased by $612 billion, an increase of 15 percent
  • During this period, load funds had negative net flows of $380 billion
  • During 2017 net new assets into all long term mutual funds sold through third party channels increased by $385 billion, an increase of 5 percent

The use of institutionally priced funds is spread evenly between retail and institutional channels.

  • The largest channel for institutional funds is the private bank channel with $880 billion
  • The fastest growing channel for institutional funds over the past five years has been the RIA channel, with an increase of $690 billion over this period
  • Assets in institutional funds have grown 8.3 percent annually over the last five years compared to 4.5 percent in direct-sold (no-load) funds and just 0.8 percent in retail load funds

“While cutting fees gets a lot of attention, the dramatic flow of assets into institutionally-priced funds has had an even more pronounced impact for shareholders,” says Jeff Tjornehoj, Broadridge’s director of fiduciary and fund research. “For perspective, the weighted average expense ratio - roughly what most shareholders pay - of equity mutual funds is now in line with pricing for bond fund fees five years ago. That’s a sea change.”

Broadridge’s Fund Distribution Intelligence comprises the most complete sales and asset data collection in the industry, creating transparency into more than $12 trillion of long-term mutual fund and ETF assets across a majority of mutual fund distributors. Broadridge serves as a transaction and information hub for the global financial services industry, analyzing the data it manages to help clients get ahead of today’s challenges and capitalize on tomorrow’s opportunities.

About Broadridge

Broadridge Financial Solutions (NYSE: BR), a global Fintech leader with over $6 billion in revenues, provides the critical infrastructure that powers investing, corporate governance, and communications to enable better financial lives. We deliver technology-driven solutions that drive business transformation for banks, broker-dealers, asset and wealth managers and public companies. Broadridge's infrastructure serves as a global communications hub enabling corporate governance by linking thousands of public companies and mutual funds to tens of millions of individual and institutional investors around the world. Our technology and operations platforms underpin the daily trading of more than $10 trillion of equities, fixed income and other securities globally. A certified Great Place to Work®, Broadridge is part of the S&P 500® Index, employing over 14,000 associates in 21 countries.

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