TheCanadian managed fund market has been blazing a trail in its take-up of fund-of-funds vehicles, with a three year asset capital annualised growth rate of 15 per cent.
The strong flow of funds into these manager of manager offerings places the Canadian fund-of-funds market at the summit of growth for the sector worldwide, according to US-based Cerulli Associates.
Cerulli goes as far as estimating that all positive new sales experienced by Canada’s funds management industry in 2002 can be attributed to the 15 per cent growth of inflows into fund-of-funds.
Cerulli also estimates that the fund-of-funds penetration of the Canadian retail fund market has been lifted to more than 5 per cent from roughly 3 per cent in 1999.
This growth comes in a period when several of the world’s largest manager of manager markets, including those of France and Germany, are shrinking.
Cerulli adds that volatile market conditions over this period have benefited the seemingly risk controlled multi-managers of Canada, with investors having been encouraged to diversify risk.
The growth is being driven by demand from two target markets — beginner investors and high-net-worth clients.
Cerulli says that keeping investment minimums as low as C$1,000, fund promoters are able to package funds for beginner investors, while higher-net-worth clients also use them to avoid capital gains tax.
Cerulli believes fund-of-funds will continue to attract investment capital due to their diversification characteristics and their function as embedded-advice portfolio management tools.
Additionally, the research group also says that the appeal of retail manager of managers will not abate, as they provide the same service to intermediaries but at a more sophisticated level.
