Institutional Product Flows Negative for 2Q07

September 19, 2007 ( - The latest quarterly "Institutional Product Review" document from Casey, Quirk & Associates based on Morningstar's separate account data shows total one-year overall flows continued to decline and were negative for the second consecutive quarter.

Overall, aggregate outflows totaled nearly $50 billion over the past four quarters, according to the document. The review provides second-quarter 2007 flow and performance data for the more than 4,000 separate accounts in Morningstar’s Institutional Investor Exchange database.

U.S. Equity products continued to experience outflows. Products in the U.S. Equity asset class experienced net outflows over the year ending in second quarter 2007 totaling $160 billion. Demand for international products declined over the past four quarters and net outflows for the past year were over $16 billion. The International Equity Core and Growth peer groups experienced the most outflows at $14 billion and $6 billion respectively.

However, Emerging Markets Equity products saw net inflows in the past year of $6 billion.

Global Equity products were the big winners of flows in the Non-U.S. Equity space. Net flows to products in the Global Equity peer group were positive and attracted over $40 billion in the past four quarters.

Fixed Income products overall attracted a net inflow of over $85 billion in the past four quarters.   U.S. Core Fixed Income products saw outflows of $1 billion, while U.S. Core Plus products saw inflows of $27 billion during this period, the data showed. Casey, Quirk attributed this trend to risk-conscious institutional investors’ attempts to decrease the volatility of their portfolios despite low returns for the asset class.

Global and International Bond products have seen steady demand from institutional investors for the past seven quarters, according to the documents. Over that period, these products have attracted $30 billion of inflows.

Non-U.S. Equity products continued to outperform their U.S. counterparts. One-year median returns for U.S. Equity products ranged from 17% to 23%, while one-year median returns for Non- U.S. Equity products ranged from 24% to 47%.

High Yield and Emerging Market Debt products were the top fixed income performers. The median one-year return for both the High Yield Fixed Income and Emerging Market Debt peer groups continued to top 10%.