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Morningstar’s Most-Researched Investments Offer Up Surprises

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Financial advisors’ investment picks diverged from institutional investors’ picks to a surprising degree in 2012, as advisors focused on income and risk mitigation while institutions signaled a return to equities, according to Morningstar’s most-researched investments.

Morningstar’s list of most-researched funds on its platforms showed advisors were particularly interested in inflation-hedging exchange-traded funds such as SPDR Gold Shares (GLD) and iShares Barclays TIPS Bond (TIP), as well as emerging-market ETFs.

Individual investors also were focused on income and risk, as well as dividends, with Vanguard Dividend Growth (VDIGX) their most-researched mutual fund and Vanguard Dividend Appreciation (VIG) their most-researched ETF.

That compares to institutional investors, whose research time was spent largely on equities. Large-cap equity strategies comprised six funds out of the top 10 of institutional investors’ list of most-researched separate accounts. About half of the most-researched mutual funds, ETFs and separate accounts by institutional investors were domestic and international equities.

In January 2013, equity mutual funds saw inflows of $15.5 billion, the largest monthly intake to equity funds since 2004 and the first month of inflows to stock funds in nearly two years, according to Morningstar’s U.S. mutual fund asset flows report.

The four most-viewed ETFs by individual investors, as well as six of the top 10, were from Vanguard, while iShares ETFs were researched most by advisors and institutional investors.

Strikingly, the PIMCO Total Return Fund found a spot on Morningstar’s most-researched investment lists for advisors, institutions and individual investors alike.

“Individual investors and financial advisors have been focused on producing income and avoiding risk for the last four years,” said Paul Justice, Morningstar director of fund research, in a statement on Thursday.  “While their risk aversion is high, they seem to be making an exception for emerging market equities, which illustrates that whatever risk appetite remains is focused overseas.”

As for the institutional story, those investors showed an affinity for domestic equities across the capitalization spectrum as well as international stocks in 2012, Justice said, adding that active management was a trend last year.

“Institutional investors searching the separate account space focused almost exclusively on active strategies last year,” he said. “Perhaps the lower negotiated prices of separate accounts for large managers indicate that investors still have an appetite for active management, but only at a competitive price.”

Go to the next page for a list of financial advisors’ most-researched mutual funds and ETFs for 2012 on Morningstar’s Advisor Workstation.

Financial Advisors’ Most Researched Investments for 2012 on Morningstar Advisor Workstation:

Mutual Funds

- Templeton Global Bond A (TPINX)

- PIMCO Total Return A (PTTAX)

- American Funds Growth Fund of America A (AGTHX)

- Franklin Income A (FKINX) – Oppenheimer Developing Markets A (ODMAX)

- First Eagle Global A (SGENX)

- American Funds Capital World Growth and Income A (CWGIX)

- BlackRock Global Allocation Inv A (MDLOX)

- American Funds Capital Income Builder A (CAIBX)

- Permanent Portfolio (PRPFX)


- SPDR Gold Shares (GLD)

- iShares Barclays TIPS Bond (TIP)

- Vanguard Dividend Appreciation ETF (VIG)

- Vanguard MSCI Emerging Markets ETF (VWO)

- iShares SandP U.S Preferred Stock Index (PFF)

- iShares MSCI Emerging Markets Index (EEM)

- iShares MSCI EAFE Index (EFA)

- SPDR S&P 500 (SPY)

- Vanguard REIT Index ETF (VNQ)


Read Equities Are Hot, but Bonds Still Sizzling: Morningstar at AdvisorOne.


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