The global fund management industry climbed at a 3.9 per cent organic growth rate last year, according to Morningstar’s first global fund flows trend report.

The report identifies the trends that drove 2012 mutual fund asset flows in five key markets: Australia, Canada, Europe, Japan, and the US.

US fixed income, which houses the intermediate term bond category and PIMCO total return, as well as double line total return, is the largest long-term global category - with nearly $2 trillion in assets under management. US investors contributed $199 billion of the category’s $227 billion total inflows in 2012, while the PIMCO fund leads as the world’s largest actively-managed strategy, with $44 billion in assets, the firm said in a statement.

The report reveals that interest from cross-border investors was the driving force behind the US fixed income category, which enjoyed a 47 per cent organic growth rate.

“Excluding money market funds, $565 billion flowed into mutual funds during the year. These massive inflows, though, fell short of 2009 and 2010, which saw inflows of $746 billion and $672 billion, respectively. Moreover, the average management fee that the industry gathers from investors has fallen dramatically since 2007 due to the cyclical shift to fixed-income products, and a secular inclination toward less expensive funds,” said Syl Flood, product manager, investment research, Morningstar.

“The prevailing global trend in 2012 was investors’ hunger for yield and quest for the perceived safety of fixed-income funds. Worldwide, fixed-income funds gathered $535 billion in 2012, or nearly 95 per cent of long-term net inflows,” said Flood.

While actively-managed funds held 78 per cent of worldwide mutual fund and exchange-traded fund AuM, passive products captured 41 per cent of estimated net flows ($355 billion) in 2012. Index funds grew faster than actively-managed funds in every region during the year, with the exception of Australia and New Zealand. The US led the way in its appetite for low-cost, passive strategies, the firm said.

Meanwhile, newer funds (those without a three-year track record), held 87 per cent of worldwide inflows in 2012, and Vanguard and PIMCO took in 16 per cent and 18 per cent of worldwide long-term mutual fund inflows in 2012, respectively.