Sub-advised fund assets topped $1.7 trillion in 2010, an all-time high, Financial Research Corp. said.
“Sub-advised products now represent 13.4% of the industry for mutual funds and 42% for variable annuities,” said Lynette DeWitt, director of sub-advisory research at FRC. “These figures are up from 12.9% for mutual funds and 40% for variable annuities at year-end 2009. In fact, market growth has been so strong that later this year we will be revising our 2015 forecast upward.”
In 2010, investment advisors moved $120 billion of sub-advised assets to different managers, also a record high. However, DeWitt expects that to subside in 2011 as advisors give their new sub-advisors time to “settle in.”
In the past 10 years, the sub-advisory market has grown steadily, with mutual fund sub-advised assets rising an average of 10% a year and variable annuity sub-advised assets rising an average of 11%. The biggest growth in sub-advised assets has been in corporate bond funds, followed by international bond funds and international equities.
“We see the sub-advisory market for the remainder of 2011 being a competitive environment, with performance pressure escalation and broader market challenges,” DeWitt said. “Toward the broader horizon, our view is of a market that will continue to grow along historic patterns, with relatively greater increases on the way for sub-advised variable annuities.”