Multistrategy alternative mutual funds experienced strong asset growth of 37.4% in 2012 compared to single strategy at 17%, according to Cerulli’s latest U.S. Monthly Product Trends. “A lot of financial advisors don’t have enough expertise in alternatives or time to figure out how to allocate among various strategies,” so they are opting for a complete solution, where the manager determines the allocation, according to Cindy Zarker, director of Cerulli’s asset management practice.
Meanwhile, bank-loan funds rose from the ninth-ranked flow category in 2012 to fourth as of February 2013 YTD, according to Cerulli. The majority of more than $97 billion in bank-loan fund assets reside in open-end mutual funds (85.4%), the consultancy said. Some bank-loan assets are managed in other vehicles or directly for institutional clients.
“The potential for rising interest rates is chief among the reasons that institutional and retail investors are allocating assets to bank-loan investments, but it is not the only reason,” according to the U.S. Monthly Product Trends report. “Bank loans are typically structured as floating rate, which translates to less duration risk than many fixed-income securities.” These loans do carry credit risk, Cerulli noted.