Tim Strauts: When most people look at the fund industry, they tend to focus on the largest firms. But to see what the emerging trends in the industry are, it makes sense to look at fast-growing smaller firms.
In today's chart, we are going to examine the fund families that have had the highest organic growth rate in the last year. A large firm will have difficulty growing as fast as a smaller firm, so this measure will tend to highlight smaller fund companies. The chart is broken into two parts: On the left-hand side, you can see the fund-company name and the firm's growth rate in the last year. The blue part of the bar shows the amount of growth that came from their top-flowing fund. If the bar is mostly blue, it tells you that the firm is growing rapidly because of just one popular fund. This is the case with Metropolitan West. If the bar is mostly red, the firm's growth is being evenly distributed amongst many funds. Schwab ETFs is an example of a firm with diverse growth across its fund lineup. On the right-hand side of chart, we show a table that gives you the name of the top-flowing fund, the Morningstar Category that it's in, and the total size of the fund.
There are three main trends shown in the chart. First, we can see the beneficiaries of outflows from PIMCO. Since the departure of Bill Gross last year, PIMCO Total Return (PTTRX) has lost more than $100 billion in assets. That money has to go somewhere, and Metropolitan West, Baird, and DoubleLine seem to be investors' preferred destinations. The second trend is the continued growth of ETFs. WisdomTree, Schwab, First Trust, Guggenheim, and iShares are all ETF firms, and all of them have been growing at double-digit rates for the last few years. The third trend is the rise of alternative strategies, which can be seen in the growth of AQR Funds. Investors are looking for ways to diversify their portfolios outside of stocks and bonds, and AQR offers a diverse collection of alternative mutual funds with below-average fees.
It will be interesting to see, in the next year, if PIMCO's outflows continue, ETFs continue to take market share from mutual funds, and alternative-fund growth accelerates.