Equity funds suffer their first one-year drop in four years, according to Lipper, declining nearly 3.5% on average in 2015. U.S. diversified-equity funds weakened 2.1%, while mixed-asset funds — such as target-date products — decreased nearly 2.4% for the year.
World-equity funds had a tough year and dropped 3.9%. But sector-equity funds did even worse last year, falling 7.8%.
“Despite a disappointing finish for the year, with most of the major indices posting negative returns for December, equity markets posted plus-side returns for Q4 2015,” explained Tom Roseen, head of research services for Lipper, in a recent report.” Markets remained quite volatile for the quarter as investors kept a wary eye on the Chinese and European economies, the U.S. Federal Reserve, and free-falling oil prices.”
Equities began the last month of the year “with a bang but ended [it] with a whimper,” Roseen adds. “At the beginning of the month both the Dow and the S&P 500 posted their largest one-day gains in three months on an upbeat jobs report … [of] a better-than-expected 211,000 jobs for November …”
Later in the month, the fund specialist points out, equity prices “were whipsawed,” as investors digested the news that the Fed would be raising interest rates for the first time in nearly a decade. By mid-December, the Dow Jones posted the most 100-point daily moves in the month of December since 2008, “making for one of the most volatile Decembers in years,” explains Roseen.
Lipper says its preliminary Q4 2015 fund-flows figures indicate that fund investors were net redeemers of fund assets for the quarter, withdrawing an estimated $42.6 billion from conventional funds (excluding ETFs). Close to $72 billion was redeemed from equity funds and over $44 billion from taxable bond funds. Meanwhile, investors purchased a net $65.9 billion of money market funds and $7.6 billion of municipal bond funds.