It is easy to dismiss new funds as an immature, unproven, and unimportant segment of the asset-management industry. But the truth of the matter is that the asset-management industry is dominated by new funds. Globally, we find that new funds account for the preponderance of new asset flows. In 2015, global fund flows reached approximately $516.4 billion across the three asset classes in our study--equity, fixed income, and allocation. Of the total, new funds with less than 12 months of track record accounted for $379 billion, or 73% of all flows. Even in years when the industry experiences net outflows, new funds continue to garner assets. In 2014, new funds grabbed $316 billion in net inflows compared with negative $526 billion in net outflows for funds with greater than 12 months of track record.
We hope, therefore, that it does not come as a surprise why the patterns of flows into new funds should be of interest to us as researchers. It is simply too big and too important to ignore. Furthermore, we are particularly concerned about investor behavior when investing in these unproven products. Do we find that investors prefer what's good for them?