By Ross Kerber
BOSTON, June 7 (Reuters) - A rush of new money from mutual fund investors is likely to tail off this year, consulting firm Financial Research Corp found in a study issued Monday.
The projection could hamper profits at big companies in the $12 trillion fund industry including Franklin Resources Inc and T Rowe Price Group. All depend on higher inflows for their revenue and profits.
Through April, investors had added a net $187 billion to U.S. mutual funds, FRC found. That put them on a record pace to beat the previous high of $347 billion in 2009 after yanking out $200 billion amid the market turmoil of 2008.
But FRC study author Bridget Bearden said she does not expect the pace to continue. For one thing, investors have shown they are more likely to cash out of long-term mutual funds when markets turn volatile, as they did in May.
'We think that kind of investor apprehension will continue,' Bearden said in an interview. Investors have also been holding funds for shorter time periods generally, she said.
Investors added more to fixed-income products than to equity mutual funds in 2009, even though the Standard & Poor's 500 soared more than 26 percent during the year. That was an indication that investors have become more conservative, she said.
'Investors did not chase performance even though the S&P returns were so high,' she said.
Because of the trend, Bearden said she expects funds to wind up with around $274 billion in total inflows this year, and to decrease a bit more for 2011 before recovering.
Some companies have made similar comments on flow trends to date. Speaking at an investor presentation in New York last week, Legg Mason Inc Chief Executive Mark Fetting said some clients seem hesitant to invest in long-term funds and that his company had seen 'a bit of a pause in what was otherwise forward momentum' among investors deciding where to put their cash.
In other areas, the FRC study also found the number of retail financial advisers fell 17 percent from 2009 to 2010, due to industry consolidation and the closures of independent broker-dealers. However, retail advisers still accounted for about 60 percent of total mutual fund sales in 2009, underscoring the sector's importance for an industry that once relied more heavily on direct-to-consumer advertising.
(Reporting by Ross Kerber, editing by Matthew Lewis) Keywords: FUNDS/FLOWS (Ross.Kerber@ThomsonReuters.com; + 1 617-856-4341; Ross.Kerber.Reuters.com@Reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BOSTON, June 7 (Reuters) - A rush of new money from mutual fund investors is likely to tail off this year, consulting firm Financial Research Corp found in a study issued Monday.
The projection could hamper profits at big companies in the $12 trillion fund industry including Franklin Resources Inc and T Rowe Price Group. All depend on higher inflows for their revenue and profits.
Through April, investors had added a net $187 billion to U.S. mutual funds, FRC found. That put them on a record pace to beat the previous high of $347 billion in 2009 after yanking out $200 billion amid the market turmoil of 2008.
But FRC study author Bridget Bearden said she does not expect the pace to continue. For one thing, investors have shown they are more likely to cash out of long-term mutual funds when markets turn volatile, as they did in May.
'We think that kind of investor apprehension will continue,' Bearden said in an interview. Investors have also been holding funds for shorter time periods generally, she said.
Investors added more to fixed-income products than to equity mutual funds in 2009, even though the Standard & Poor's 500 soared more than 26 percent during the year. That was an indication that investors have become more conservative, she said.
'Investors did not chase performance even though the S&P returns were so high,' she said.
Because of the trend, Bearden said she expects funds to wind up with around $274 billion in total inflows this year, and to decrease a bit more for 2011 before recovering.
Some companies have made similar comments on flow trends to date. Speaking at an investor presentation in New York last week, Legg Mason Inc Chief Executive Mark Fetting said some clients seem hesitant to invest in long-term funds and that his company had seen 'a bit of a pause in what was otherwise forward momentum' among investors deciding where to put their cash.
In other areas, the FRC study also found the number of retail financial advisers fell 17 percent from 2009 to 2010, due to industry consolidation and the closures of independent broker-dealers. However, retail advisers still accounted for about 60 percent of total mutual fund sales in 2009, underscoring the sector's importance for an industry that once relied more heavily on direct-to-consumer advertising.
(Reporting by Ross Kerber, editing by Matthew Lewis) Keywords: FUNDS/FLOWS (Ross.Kerber@ThomsonReuters.com; + 1 617-856-4341; Ross.Kerber.Reuters.com@Reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.