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Thursday, May 30, 2024

Most New Active Funds Don't Reach $1B In 5 Years

Reported by Neil Anderson, Managing Editor

The vast majority of new active funds don't reach ten-figure territory anytime soon, according to new research from an consulting firm that supports fundsters.

Lisa Travaglini
Fuse Research Network
Director of Editorial
Lisa Travaglini, director of editorial at Fuse Research Network, reveals the Boston-based firm's new findings on attrition among new active ETFs and active mutual funds. The findings focus specifically on launches after December 2012 (i.e. more than 11 years ago).

Travaglini reveals that only 16 percent of new active funds reach the $500-million-AUM threshold within five years of launch (which means that 84 percent don't make it). Only 9 percent reach $1 billion (which means 91 percent don't make it). The odds are a bit more favorable for bigger firms, where 20 percent of new active ETFs and 23 percent of new active mutual funds reach $500 million.

"This data underscores the competitive distribution landscape and headwinds for new products," the Fuse team writes.

Most of the funds that don't reach those thresholds within their first five years disappear entirely. The Fuse team found that, of the new active funds that didn't get to $500 million in AUM within five years, 52 percent ceased to exist by the end of that time window. Among new active funds that didn't get to $1 billion in AUM fast enough, 53 percent died within those first five years. 

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