Cerulli: VA subadvised assets to grow by 25 percent through 2014
By National Underwriter
By Warren S. Hersch
Variable annuity assets managed by subadvisors are expected to grow by 25 percent by year-end 2014, according to a new report.
Cerulli Associates, Boston, published this finding in the July 2012 edition of “The Cerulli Edge: U.S. Asset Management.” The monthly publication analyses topics related to product development and strategy, distribution, pricing, and market segmentation.
Cerulli estimates that variable annuities under management with subadvisors will grow to $787 billion by year-end 2012, $849 billion at year end 2013 and $915 billion at year-end 2014.
Subadvisors are investment manager hired by Registered Investment Advisors to oversee day-to-day portfolio management of retail clients’ investments.
Long-term mutual funds and retail separate accounts managed by subadvisors are anticipated to grow over the same period to, respectively, $1.74 trillion and $326 billion (2012), $1.95 trillion and $332 billion (2013) and $2.066 trillion and $337 billion.
The total subadvisory market tallied $2.8 trillion in assets under management at year-end 2011, according to the report. Growth in the subadvisory marketplace has been flat during the past three years, accounting for between a 12.4 percent and 12.5 percent share of long-term mutual fund assets, the report says.
Long-term mutual funds accounted for $1.7 trillion of the $2.8 trillion total. Variable annuities and retail separate accounts accounted for $730 billion and $321 billion, respectively.
The percentage of total subadvised alternative mutual funds current stands at 18.3 percent. This compares, the report notes, with 12% to 14% for traditional mutual funds. The top subadvised alternate mutual fund assets include commodities ($14.7 billion or 20% of all commodity assets), alternative allocation ($9.3 billion and 57 percent, respectively), and natural resources ($5.3 billion and 18 percent, respectively).
The average management fee and fee paid to subadvisors by asset class in 2012 were 0.95 percent and 0.47 percent, respectively, for international equity funds; 0.78 percent and 0.38 percent, for domestic equity funds; 0.57 percent and 0.27 percent for taxable bonds; and 0.44 percent and 0.22 percent for tax-free bonds.
Originally published on LifeHealthPro.com