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July 19, 2016 at 10:48 AM
Investors continue to take their money out of active funds at a rapid clip.
“Not only did active U.S. equity funds post a $21.7 billion estimated outflow in June, but all active category groups except municipal bonds suffered outflows,” Morningstar said in its analysis of June fund flows, released Tuesday. “In contrast, all flows (except alternative) on the passive side were positive.”
In addition, the Chicago-based research firm says, active U.S. equity products experienced the largest monthly outflow since October 2008.
Taxable- and municipal-bond funds, on the other hand, are attracting a steady streak of inflows, as are commodities.
“The S&P 500 returned a modest 0.3%, and the MSCI EAFE lost 3.4% in June,” explained senior analyst Alina Lamy in the group’s report. “However, the flows story, for once, does not seem to follow returns: Investors withdrew $13.0 billion from U.S. equity [funds] and only $56 million from international equity.”
Given the recent uncertainty surrounding the global economy, investors have been moving funds into lower-risk assets, Lamy adds, “hence the sustained inflows to bonds seen since January.”
Aggregate bonds, as measured by the Morningstar Core Bond Index, have returned 5.3% through June 30, while municipal bonds – tracked by the Barclays Municipal Bond Index – are up 4.3%.
“This may not seem like much, but in today’s world of diminishing returns, it still looks like a pretty good deal,” the analyst stated.
As for fund families, Fidelity and Franklin Templeton suffered the largest outflows in June.
“In fact, all the firms in the top 10 except Vanguard and State Street experienced outflows on the active side. Even American Funds, which had been doing well for the past few months, suffered an outflow,” Lamy said.
Fidelity, for instance, had June outflows from its active funds of $3.8 billion; these outflows total $32.2 billion for the past 12 months. Its passive funds, though, had inflows of $3.3 billion in June and $19 billion for the past year.
