The global mutual funds industry may feel like it has just taken a beating to the head, with mass redemptions and devaluations. But the story in Asia is not quite so disheartening: funds registered onshore in major jurisdictions gained a net inflow of $80 billion in 2008, despite assets under management declining 30%.
New York-based research house Strategic Insight says China accounted for the biggest portion, with $35 billion of inflows in the fourth quarter (mainly to cash products), and $36 billion of net inflows for all of 2008. The Chinese market also enjoyed inflows into a variety of products in the first half of the year, notes Jag Alexeyev, senior managing director and head of research.
But even jurisdictions that are not considered healthy funds markets right now, including Japan and Korea, enjoyed net inflows in 2008.
Not all players are benefiting. In 2006-07, over 50% of registered funds enjoyed net inflows. In 2008, only 30% did. Alexeyev estimates about half of subscriptions went to money-market funds. Another 40% went to bond funds. But equity funds in some markets still accounted for 10% of net inflows in 2008. Real estate funds and multi-asset products experienced net outflows.
The vast majority of inflows went to new product launches. "Product development remained essential," Alexeyev says. Funds introduced before 2008, on the other hand, posted aggregate outflows, with the exception of cash-management vehicles. Investors in Japan went for higher-yield income structures, including Brazilian real funds and currency products, while Chinese investors favoured stable income bond funds.
"These results show the long-term growth of mutual funds in Asia remains on track," Alexeyev says. The past year challenged the notion that Asian investors would embrace funds for their long-term investments, and "many predicted the worst for China". So these results should come as a pleasant surprise. "Millions of new investors in China are not redeeming, but rather they added to new money-market funds," Alexeyev says.
This is in contrast to Europe, where mutual funds suffered net redemptions of $500 billion across all asset classes. The US proved resilient, with net inflows of $420 billion to mutual funds, although this was largely to cash products, with equity and bond funds each losing about 2% of AUM from redemptions in 2008.