INFLECTION POINT FOR THE ASSET MANAGEMENT INDUSTRY: $4 TRILLION IN FIVE-YEAR FLOWS, A ‘GOLDEN AGE’ FOR ASIA AND RE-DISTRIBUTION OF ASSETS IN EUROPE AND THE US

NEW YORK, NY – February 24, 2010 – Largely untarnished by the global credit crisis, the mutual fund industry gathered $4.2 trillion in net cash flows worldwide in the second half of the decade, according to Strategic Insight (SI), a business intelligence provider to the fund industry.

“Equity and mixed funds led the way with $1.7 trillion in cash contributions, followed by almost $900 billion to fixed-income funds, mostly from the US, but with meaningful contributions from Asia”, commented Daniel Enskat, Senior Managing Director and Head of Global Consulting at SI. In 2009, investors withdrew $650 billion from money market funds, but in turn contributed almost $900 billion globally to long-term funds across asset classes.

“The data and our primary research with distributors points to a historical turning point for the global fund industry, due to a number of secular trends outlined in detail in the SI study”, Enskat said, including:

 $60 trillion in cash on the sidelines earning near-zero yields: Demand for income yielding investments will benefit mutual funds.

 Year of the tiger, decade of the dragons: Asia local long-term fund flows of $850 billion in the last five years were almost ten times larger than in Europe. Adding to this total, Asia-attributable offshore flows of about $120 billion brings Asia almost on par with the US. In other words, Asia with only a fraction of US assets under management and only about 5% mutual fund household penetration across the region (compared to close to 50% in the US) generated almost equivalent net flows.

 An emerging market revolution for HNW investing: Asia-Pacific is expected to surpass North America in terms of the number of high net worth investors at some point in the next three years. Different investment cultures, goals and asset allocation frameworks could result in a new era for wealth management in emerging markets with regard to portfolio construction and client segmentation.

 A “Golden Age” for Asia: Global money managers are relocating CEOs to Asia, while Asian institutions see a “once in a lifetime” opportunity to take market share away from global competitors.

 Re-distribution of assets in Europe: After a few challenging years, Strategic Insight data points to a rare opportunity in the European fund management industry to benefit from hundreds of billions in net flows back to funds in 2010 as investors continue to cautiously shift back to equities and long-term investments.

 Asia industry more stable then Europe: Product turnover ratios in Asia remain high, but SI aggregate data suggests greater stability in Asia than in Europe. Asia since 2005 gathered $1 trillion in long-term flows, while Europe totaled $430 billion.

“To build distribution in Europe and Asia, top asset managers should focus on becoming a strategic partner for global financial institutions – in fact many firms are now establishing dedicated units for this channel or are significantly strengthening existing sales/support structures. Boutiques and mid-size firms can benefit from the growth in other channels, such as IFAs, tied agents, insurance firms, smaller private banks and selected platforms and FOFs”, Enskat commented.

“However, in addition to specific distribution channel opportunities, non-proprietary asset managers today more than ever need to be mindful of the vastly different framework and moods by market and tailor penetration approaches accordingly”.

“Our distribution research shows that professional fund buyers award the business because of the people they encounter and work with (qualitative screens); performance opens any door (quant screens), but it does not get you an invitation to stay for dinner – or to move in.

Top asset gatherers like Blackrock or PIMCO have better dedicated websites and information delivery on their sites than their competitors, while smaller firms stand out with thought leadership. We believe that this could become a meaningful battle ground for companies, as distributors choose to work with fewer companies and rely on them more for tailored real-time information”.

About Strategic Insight
Strategic Insight is a research and consulting firm that supports over 250 companies around the world with analysis, perspective, and data on the fund industry; its Simfund databases, the world’s analytical source for mutual fund business intelligence, track flows, assets, performance, ratings, and other intelligence on more than 65,000 portfolios and many more fund share classes globally.

STRATEGIC INSIGHT an Asset International company
805 Third Avenue, New York, NY 10022
http://www.StrategicInsightGlobal.com

###