Long-Term Mutual Funds See Worst Outflows in Three Years

December caps worst period since crisis began, Morningstar says

Morningstar reported Friday that domestic mutual fund asset flows fared poorly through December 2011. Long-term mutual funds had a second consecutive month of net redemptions with outflows of $10.6 billion in December.

The Chicago-based research firm said long-term funds have now experienced outflows in five of the last seven months to mark the worst stretch since the late 2008-early 2009 financial crisis. Including funds that merged or liquidated during the year, long-term funds collected inflows of just $55.6 billion in 2011.

Additional findings include: 

  • U.S.-stock funds continued to be the primary driver of outflows, as they shed $18.5 billion in December and about $98.8 billion for the year. 2011 was the sixth consecutive year of U.S.-stock outflows and the worst year for the asset class since $121.2 billion fled in 2008.
  • Although December saw international-stock funds suffer their worst monthly outflows since March 2009 with redemptions of $6.6 billion, outflows for the asset class were roughly flat for the year, leaving them about $99.2 billion ahead of U.S.-stock funds in 2011.
  • Municipal-bond fund flows steadily improved during 2011, with the trend turning positive after outflows peaked at $13.3 billion in December 2010. The asset class finished strong with inflows of $4.8 billion in December, its strongest month since August 2010.
  • Across all asset classes, passively managed long-term funds had inflows of $62.2 billion in 2011, just short of the $68.8 billion collected in 2010. The bulk of these inflows went into international-stock and taxable-bond funds. Meanwhile, actively managed funds shed approximately $6.7 billion in 2011. 
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