BOSTON—While equities continue to dominate portfolios, asset allocation models are increasingly embracing alternatives and flexible mandates—“and these changing views on asset allocation are putting billions of assets in motion and creating opportunities for sales,” said Dennis Bowden, senior research analyst with Strategic Insight.

“The U.S. has seen a tremendous evolution of channels and changes in financial adviser and investor demands for new asset allocation models,” he said Monday at FundForum USA 2010.

Since the beginning of last year through September of this year, investors have redeemed $100 billion from actively managed U.S. equity funds and placed $130 billion into international equity funds and $70 billion into global bond funds, Bowden said.

“In 2009, equity-centric portfolios turned on their head. Financial advisers have changed their views around asset allocation, the way they construct portfolios and their core,” Bowden said. “Equities continue to be a significant portion of fee-based portfolios, but funds picking up traction have changed, with sales moving to more flexible mandates that can protect on the downside, as well as funds that generate income. This creates an opportunity for fund companies to educate advisers on alternatives.”

The biggest growth in sales in the first half of this year has been in global equity funds, which now comprise around 15% of wrap program portfolios, a 4% increase from the first half of last year; emerging markets funds, which now comprise 6%, a 2% increase; and balanced funds, which now comprise 5%, a 1.5% increase, according to Strategic Insight.

And the top 10 best-selling investment styles in mutual  funds since 2009 are: Taxable Fixed Income,  Municipal Fixed Income, Global Fixed Income, Global Equity, Emerging Market Equity, Taxable Strategic Income, Specialty, Long/Short Equity, High-Yield Taxable and Balanced.

At the same time, “ share class pricing and fees paid for financial advice now has added importance,” Bowden said. Wrap-fee advisory platforms have grown from 25% share of sales in 2007 to 37% in 2009, and the biggest increase in sales in 2009 were in wrap-fee programs, which rose by 16%.

The next-closest increase was registered investment advisers, regional broker-dealers and national broker-dealers, whose sales each rose 4%. Sales in all other major channels decreased last year, with bank broker-dealers seeing a 1% decrease in mutual fund sales, investment only defined contribution -9%, pure institutional -23% and insurance agents -27%.

“Fee-based advice is a secular trend that will continue to flatten the competitive landscape across managers, product types and share class pricing,” Bowden said.