The paper examines equity, fixed-income, and balanced funds globally to draw conclusions about how investors make investment decisions.
Key findings from the “What Factors Drive Investment Flows?” report:
U.S. investors strongly prefer low-cost funds, but these preferences are virtually nonexistent outside of the United States.
- Indexed equity funds receive higher flows at the expense of active equity funds. The trend reverses for fixed-income and balanced funds, as investors globally favour active strategies.
- Investors expressed a strong preference globally for funds that invest in a socially conscious manner. Globally, equity funds that self-identify as socially responsible receive 0.40 percent greater flows per month than funds that do not.
- Investors globally respond to Morningstar ratings—both the quantitative Morningstar Rating™ (the “star rating”) and the qualitative Morningstar Analyst Rating™. Funds with a higher Morningstar Rating attract greater inflows than funds with lower ratings. The five-tiered Analyst Rating scale has three positive levels, indicating Morningstar Medalists—Gold, Silver, and Bronze—and has proved to be a strong asset flow indicator as well.
- Investors seek out funds from higher-quality firms, and a notable relationship exists between asset flows and portfolio manager tenure. Investors favour long-tenured managers and visible continuity of fund management, suggesting that funds with co-management and internal promotion practices are better insulated from the adverse effects of manager departure.
To read the full report, click here.
For more information about Morningstar Asset Flows, please visit http://global.morningstar.com/assetflows.
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