20 of 25 Fastest-Growing Fund Management Firms Under $5 Billion in Size

May 3, 2011 - PRLog -- Twenty of the top-25 fastest growing fund firms over the 12 months ended March 2011 had less than $5 billion in stock and bond fund assets under management as of March 2010, according to research from Strategic Insight, a business intelligence provider to the worldwide fund industry.

This finding is based on a ranking of the 25 fastest-growing managers of stock and bond funds during the 12-months ended March 2011 -- ranked by net flow growth rate, which is defined as net flows divided by beginning-period assets, a measure of organic growth (note: the list excludes the smallest fund managers, generally under $1 billion of managed assets).

The 10 fastest-growing fund management firms by net flow growth rate:

1. DoubleLine Capital (Net flow growth rate not material)
2. Global X management (Net flow growth rate over 12-month period >100%)
3. Stone Harbor (>100%)
4. AQR Funds (>100%)
5. ETF Securities USA (>100%)
6. Yacktman (>100%)
7. JP Morgan Chase (ETNs) (>100%)
8. Int'l Value Advisors (>100%)
9. ALPS Advisors (>100%)
10. Water Island (96%)

Smaller fund managers’ focused and specialized investment skills – and high-conviction philosophies – continue to garner tremendous appeal in certain areas of the marketplace. “The road to success among these firms highlights the unique capabilities of such fund managers and the continued demand for this type of skill among advisors and investors,” said Dennis Bowden, senior research analyst at Strategic Insight. “So the fact that smaller fund managers dominate the list of fastest-growing firms is not surprising.”

•   Within the roughly $56 billion of total net inflows garnered by this group of 25 managers over the 12 months ended March 2011, a large majority of such commitments were to equity funds. In fact, nearly one-half of this total ($27 billion) flowed into US Equity funds, while International Equity funds attracted an additional $17 billion among our peer group over this period.
•   This breakdown of net flows in favor of equity funds runs in contrast to overall industry trends, where Taxable Bond funds have attracted over $200 billion of net inflows over the 12 months ended March 2011 – accounting for about 60% of the industry’s $340 billion of total net deposits.
•   Among our group of the 25 fastest growing managers, bond funds accounted for just $11 billion of total net inflows. More than one-half of such bond fund deposits came via DoubleLine Capital – the top-growing manager over the 12 months ended March 2011. In fact, based on Strategic Insight’s Simfund database, which has comprehensive mutual fund data going back more than 25 years, DoubleLine’s $5.9 billion of net inflows since the firm’s inception in April 2010 makes it the fastest-growing US mutual fund manager ever during its first year of operation (based on the amount of money raised from investors in the first 12 months after launch of the manager’s first publicly offered fund).

While such managers have traditionally found significant success among the independent RIA community, Strategic Insight’s ongoing research series focusing on the National Broker Dealer marketplace (leveraging the data of Coates Analytics) – National Broker Dealer Product Strategy & Distribution Trends – has also shown increased traction for many smaller fund managers among this large group of financial advisors as well. For example, Permanent Portfolio – managed by Pacific Heights (the 11th fastest growing manager captured in our preceding table) – ranked among the top-selling individual funds within certain National BD mutual fund wrap programs during the first quarter of 2011.      

According to SunStar Strategic, a consulting firm that has advised Strategic Insight on this research and that works with many small asset managers to help develop their distribution and marketing efforts, this wider distribution through the major platforms has played a key role in recent growth for many small fund firms. “These firms have done a terrific job of working with the platforms, connecting with advisors and investors,” said Dan Sondhelm, SVP and partner at SunStar. “These smaller fund managers should be commended for their rapid growth despite the lingering risk aversion among investors.”

Many of the managers identified by the study focused on providing consistent web posts, and frequent white papers, press releases and emails in order to communicate their investment philosophies in up and down markets. “Particularly in difficult times, it is important that advisors and investors are reassured that their fund managers stick to their discipline,” Sondhelm added.

Beyond traditional mutual fund offerings, exchange traded funds (ETFs) have also experienced significant growth over the past several years. A number of the fastest-growing firms in our peer group specialize in ETFs (and exchange traded notes). In particular, strong net inflows to ETFs spurred each of Global X Management, ETF Securities USA, JP Morgan Chase and ALPS Advisors to rank within the top-10 fastest growing managers over the 12 months ended March 2011. Strategic Insight’s recently published report – How Financial Advisors Use ETFs – provides unique analysis of financial advisors’ use of ETFs within the National Broker Dealer community.

The rapid and unique growth of small fund managers is often overlooked amid the attention to large fund management firms that have helped drive the mutual fund industry to significant growth post-crisis. Globally, investors have deposited nearly $2 trillion of net inflows into stock and bond mutual funds since the start of 2009. In fact, by early May assets managed by the global mutual fund industry has reached an all-time record of near $31 trillion, eclipsing the prior record of near $30 trillion just before the global financial crisis. This rapid pace of engagement worldwide has served to reaffirm and strengthen mutual funds’ standing as investors’ preferred vehicle for prudent savings, investment and diversification.

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Strategic Insight, an Asset International company, is a leading research firm for the mutual fund and wealth management industry, providing clients with in-depth studies, consultation, and electronic decision support systems.