Morningstar: Equity Funds Get Second-Biggest Boost This Year

Overall fund flows hampered by bond fund exodus

(Photo: AP) (Photo: AP)

Is the great rotation actually happening?

From the latest Morningstar report on fund flows, it would appear so.

The Chicago-based research firm reported estimated U.S. mutual fund asset flows for October. U.S. equity funds collected $10.5 billion, their highest monthly inflow since January.

International equity funds also had a solid month, leading all category groups with inflows of $12.2 billion.

But continued outflows from taxable and municipal bond funds tempered overall inflows, which totaled $17.8 billion for the month.

Morningstar estimates net flow by computing the change in assets not explained by the performance of the fund.

Additional highlights from the report include:

  • Active U.S.-equity funds had strong monthly inflows for only the third time in 2013, a year many heralded as the great rotation into active strategies after years of passive-fund flow dominance. While the trend has not materialized, outflows from active equity funds have amounted to $15.3 billion for the year to date compared with outflows of $131.5 billion in 2012.
  • Equity categories took the top three spots in terms of inflows by category, led by foreign large blend. October was the first month since March that bank loan, nontraditional bond, or world bond did not lead all categories in flows, and the first time in more than a year that the bank-loan category was not in the top five.
  • Inflation-protected bond funds saw their largest outflow on record, with $4.8 billion fleeing the category in October. The average fund in the category has lost 5.9% year to date.
  • Vanguard dominated inflows at the provider level in October, collecting new assets of $6 billion overall and led by inflows of $2.1 billion for Vanguard Total Stock Market Index Fund. Vanguard’s market share of mutual fund assets stands at 17.5%, up from 15.6% three years ago. American Funds’ market share has fallen to 10% from 12% over the same period, and PIMCO’s has dropped to 5.1% after peaking at 6.1% in late 2012.

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Check out Great Rotation Overblown, Sanford Analyst Says on ThinkAdvisor.

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