Sub-advised fund assets grew by 9.1% last year, compared to internally managed funds, which actually dropped by 2.9%, according to a new study by Financial Research Corp. While sub-advised stock and bond funds account for only 10.1% of total industry assets, they drew in 16% of total net flows in 2000, according to FRC.

Several large fund families outsourced the management of some of their internally managed products, amounting to $11.1 billion in new assets for the sub-advised segment of the industry, according to FRC. For instance, Prudential outsourced 50% and PaineWebber outsourced almost 80% of its funds in 2000. "A lot of companies looked at their internal line-ups and were pretty unhappy with them," said Kunal Kapoor, a senior fund analyst at Morningstar. "Firms were trying to boost performance and take out the stigma of managing their own money. Brokerage companies, especially, have had a tough time developing their asset management business."

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