More On Tax Planningfrom The Advisor's Professional Library
- Selected Provisions of the American Taxpayer Relief Act of 2012 The experts of Tax Facts have produced this comprehensive analysis of selected provisions of the American Taxpayer Relief Act of 2012 (the Act) to provide the most up-to-date information to our subscribers. This supplement analyzes important changes to the tax code with emphasis on how these developments impact Tax Facts’ major areas of focus: Employee Benefits, Insurance, and Investments.
- Cafeteria Plans The income tax treatment of cafeteria plans is key to their popularity. Learn how to maximize the tax benefits of these “flexible benefit plans”.
Investors continue to shun U.S. stocks and are increasingly putting their money into funds that feature bonds, commodities, and alternative investments, according to the latest research from Morningstar.
In its U.S. mutual fund and exchange-traded fund (ETF) asset flows report for July, released Wednesday, August 11, Morningstar said that nearly $12.4 billion exited U.S. equity funds last month, despite a strong rebound in share prices. While the average domestic large-blend fund is still down 6.8% overall during the past three months, the category gained 6.8% in July.
ETFs, meanwhile, registered total net inflows of $6.8 billion in July, marking the sixth consecutive month of positive asset flows. Total ETF assets are up 6% since the start of the year and 29% over the trailing 12 months.
Overall, flows into U.S. open-end mutual funds increased slightly in July to $14.1 billion versus $13.5 billion in June.
"But this small change understated the acceleration in this year's underlying themes, "commented Editorial Director Kevin McDevitt in the August issue of Morningstar Direct Fund Flows Update. "Almost universally, outflows picked up in equity and balanced funds; and inflows rose for bond, alternative, and commodity funds."
Bond funds had another strong month of inflows, according to Morningstar, with investors adding $22.3 billion to taxable-bond funds and $3.9 billion to municipal-bond funds, approximately double the inflows municipal-bond funds saw in June.
Also, international-stock funds saw less severe outflows of $565 million, while flows into emerging-markets equity funds offset redemptions from broader foreign-stock funds. Emerging-markets equity funds had roughly $161.4 billion in total assets, up nearly 41% over the last year, Morningstar said.
"These trends suggest that risk aversion continues to be the dominant sentiment, but that makes the continued flows out-of-balanced funds all the more confounding. The moderate-allocation category took the brunt of this development with nearly $2.1 billion in outflows," McDevitt said.
On the other hand, alternative and commodity funds continued their surge. Alternative funds took in about $1.7 billion, with the long-short and bear-market categories benefitting most.
Read a story about Strategic Insight's midyear fund inflows report from the archives of InvestmentAdvisor.com.