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Lipper’s Q3 2015 U.S. Mutual Funds And Exchange-Traded Products Snapshot

By Tom Roseen Conventional Mutual Funds Summary Global markets took it on the chin over the last three months, with fears of slowing global growth, Federal Reserve tightening measures, slumping commodity prices, and drug-pricing issues sending the major indices down during the quarter more than 10% from their recent market highs. Total net assets (TNA) in the conventional funds business (not including exchange-traded products [ETPs] and variable insurance products [VIPs]) dropped below the $15-trillion mark for the first quarter in six. As a result of large declines in the price of oil and on fears of China’s slowing growth, for Q3 2015 the emerging markets funds macro-group witnessed the largest relative (-17.52%) decline in total assets under management from the prior quarter-end, while the large-cap funds macro-group suffered a decline of $152.3 billion-the largest absolute decline in total assets under management. Investors ducked for cover during the quarter and padded the coffers of money market funds. The fund group witnessed the largest relative (+1.35%) and absolute (+$30.5 billion) increase in TNA for the quarter. Open-End Funds’ (ex-ETPs’) Total Net Assets ($Mil) by Macro-Group, Rolling Quarters Through Q3 2015 (click to enlarge) Source: Thomson Reuters Lipper Exchange-Traded Products Summary On fears of slowing global growth, Federal Reserve tightening measures, and slumping commodity prices during Q3 2015, TNA in U.S. ETPs (including exchange-traded funds, exchange-traded notes, exchange-traded commodities, limited partnership commodity pools, master limited partnerships, and exchange-traded fund [ETF] unit investment trusts) dropped below the $2.0-trillion mark for the first quarter in four. For Q3 2015 the emerging markets ETPs macro-group witnessed the largest relative (-26.00%) and absolute decline (-$37.0 billion) in TNA from the prior quarter-end. The alternatives ETPs macro-group experienced the largest relative (+26.35%) increase in TNA for Q3, while the Short-/Intermediate-Term Bond ETP macro-group witnessed the largest absolute increase in TNA (+$14.3 billion) for the quarter. (click to enlarge) Source: Thomson Reuters Lipper In the complete issue of Lipper’s Q3 2015 U.S. Mutual Funds and Exchange-Traded Products Snapshot , we feature a summary of total net assets, estimated net flows, and new fund creations for conventional funds and exchange-traded products for Q3 2015, comparing those changes to prior quarters and highlighting the largest individual gainers and losers of both groups. Lipper’s U.S. Mutual Funds and Exchange-Traded Products Snapshot provides readers a powerful, easy-to-use guide and quick reference tool to help them discern fund trends for the quarter.

Goal-Oriented Investing

By Seth J. Masters How should investors assess the asset-allocation decisions they or their advisors make? In our view, the key benchmark is the investor’s own goals. The display below assesses the success of three plausible asset allocations for meeting the risk and return goals of three different hypothetical investors. Investor A wanted annualized returns greater than 5%, with no peak-to-trough drawdown deeper than 20%. Investor B targeted annualized returns greater than 7%, with no drawdown deeper than 30%. Investor C cared only about achieving a return greater than 7%, with no drawdown constraint at all. The display shows the share of all rolling 10-year periods from January 1976 to June 2015 in which each investor would have achieved his goals through each of three different mixes of global stocks and municipal bonds. The conservative (30% stock/70% bond) allocation would have most often achieved Investor A’s conservative goals, with his lower return objective and tighter drawdown limit. The moderate and growth-oriented portfolios, by contrast, would have repeatedly exceeded his drawdown constraint. The moderate (60/40) portfolio would have most often met Investor B’s goals. And the growth-oriented (80/20) portfolio would have had the greatest success rate in meeting Investor C’s goals. When risk isn’t an issue, stocks are the asset of choice. This display underscores the importance of matching a portfolio’s asset allocation to the investor’s return and risk objectives. Investors who don’t select an asset allocation that fits their objectives are likely to be disappointed. Of course, this illustration covers only simple return and drawdown goals. In most real-world situations, investors also need to take into account their expected cash flows, their tax situation, prevailing market conditions, and a host of other factors. And real-world investors can choose between more than two asset classes. But no matter how complex the objectives an investor seeks, or how diverse his or her asset allocation, we think one simple standard should apply: The asset allocation has to be designed around the investor’s objectives. If not, the investor is unlikely to be satisfied with the plan and unlikely to stick with it. The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Seth Masters, Chief Investment Officer – Bernstein