Gathering the largest percentage of inflows into all types of mutual funds in 2002, funds of funds received one out of every seven dollars that flowed into the worldwide mutual fund industry last year, according to a recent Cerulli Associates study.
While the fund of fund industry lost 17% of its assets from market depreciation, it drew in a net $15 billion in new net inflows in the year. By the end of 2002, worldwide funds of funds held $235 billion, down from $254 billion in 2001, but the industry still sports a three-year annualized growth rate of 16%. By contract, the global fund industry decreased 3% over the same time frame.
The report, titled "The Global Multimanager and Mutual Fund Subadvisory Markets 2003," states that the products are used to deliver cost-effective advice to the mass retail segment in Europe. Cerulli further states that embedded advice makes these products especially useful in areas where the provision of investment advice is unsophisticated.