Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Mutual Funds > Equity Funds

Investors Exit Active Funds to Tune of $159B Over Past Year: Morningstar

Your article was successfully shared with the contacts you provided.

Morningstar says investors are turning away from U.S.-equity mutual funds and ETFs — taking some $14.3 billion out of these products in July. That is a nearly 80% jump from June outflows of $8 billion. The outflows are not a one-month phenomena: outflows from U.S. equity funds for the first seven months of 2015 exceeded any previous annual outflows since 1993, the fund research firms says.

The losses have mainly been on the active side, with active funds seeing outflows of $20.5 billion in July and nearly $159 billion for the past 12 months, according to Morningstar estimates.

Meanwhile, passive U.S. equity funds gained assets of $6.2 billion in July and have gained $140.8 billion since July 2014.

International equities are seeing strong investor activity, enjoying inflows of about $217.7 billion in the past 12 months — near the peak level of $201.6 billion seen in 2013.

Foreign large-blend funds, for example, had inflows of $21.3 billion and collected greater inflows than the next four top-asset-gathering categories combined in July.

“The S&P 500 has only delivered a mediocre 3.4% return this year. The MSCI EAFE Index, on the other hand, has returned 7.7%. As flows tend to follow performance, money redeemed from U.S. equity has been making its way to international equity,” Morningstar senior analyst Alina Lamy explained in a report released Friday.

“Apart from flows following performance, this pattern also hints at investors’ expectations for the future. The consensus is that the United States is in the late stages of its bull market,” stated Lamy. “Globally, countries are cheaper on a fundamental level, and Europe and Japan are still actively stimulating their economies. Investors are aware that the United States and Europe are at different points in the economic cycle, and this is reflected in the flows.”

Fund Families

Different fund groups are being impacted by these trends, of course.

Vanguard, for instance, saw its passive fund flows top $16 billion in July, while its active funds had outflows of $1.3 billion. For the past year, its inflows have been over $259 billion. “J.P. Morgan and, surprisingly American Funds, were the only two providers with strong flows on the active side in July. J.P. Morgan’s captive-advisor-audience strategy keeps attracting flows,” Lamy explained.

In July, J.P. Morgan had active-fund inflows of $1.4 billion, while American Funds saw $1 billion flow into its active products. For the past 12 months, J.P. Morgan active funds drew close to $21 billion, as American Funds’ active product attracted nearly $11 billion.

PIMCO, Fidelity Problems

The PIMCO Total Return Fund “was once again the leader in terms of outflows among active funds,” according to Morningstar. Its July outflows were $3 billion, and its 12-month outflows stand at about $126.4 billion. On the bright side for the fund company, the PIMCO Income Fund had inflows of $1.2 billion in July and $10.6 billion since July 2014.

Still, outflows from both active and passive products came close to $4.6 billion in July, and its 12-month outflows approached $180 billion.

Bill Gross, who used to run the PIMCO Total Return Fund but is now managing the Janus Unconstrained Bond Fund, is encountering headwinds with his new product. “The fund has only been able to attract $1.5 billion since its inception in May 2014,” and through July “it has now experienced outflows for three consecutive months,” stated Morningstar’s latest fund report.

Over at Fidelity, the fund giant has been transferring assets to collective investment trusts. When such movement is excluded from its outflows by Morningstar analysts, outflows for its Contrafund, for instance, stood at about $530 million in July and $5.2 billion for the past year.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.