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Morningstar: Passive Equity Funds Gain Assets, Active Funds Lose Them

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October was a big month for outflows from active U.S. equity funds, according to Morningstar, which reported that investors pulled $16.8 billion from actively managed funds, compared with the $8.8 billion of outflows reported last month. Passive funds, on the other hand, continued to gain ground, with investors putting in $20.4 billion, compared with last month’s inflows of $19.4 billion.

At $29.1 billion, October saw the greatest level of long-term outflows since August 2015, when they hit $30.3 billion of outflows. According to Morningstar, these outflows represented 0.15% and 0.22% of long-term assets, respectively.

Core strategies like U.S equity outdid specialty or niche equity strategies, with investors pulling $12.6 billion — 1.4% of overall assets — from sector equity funds in October. Real estate funds and technology funds saw the biggest defections, with $3.5 billion and $3.4 billion in outflows, respectively.

Within Morningstar category groups, taxable-bond funds saw their worst month since December 2015, with $14.2 billion of outflows. But ultrashort-bond funds, on the other hand, apparently gained energy from September’s Federal Reserve interest rate hike and saw a record $11.3 billion in inflows.

Large-blend did the best of all Morningstar categories, gaining inflows of $14.5 billion, and in allocation, 30% to 50% equity was down in the dumps, losing $17.5 billion in October outflows.

Vanguard did the best among top U.S. fund families, with the highest monthly firm inflows of $9.0 billion; it was followed by Fidelity’s $6.9 billion in inflows. Fund families that saw the greatest outflows include State Street Global Advisors and Invesco; they were drained of approximately $7.4 billion and $4.3 billion, respectively.

Morningstar’s Gold-rated Vanguard Total Stock Market Index and Vanguard Total International Stock Index topped all U.S. funds in October, according to the report, gaining $7.6 billion and $6.7 billion in inflows, respectively. But ironically another Vanguard fund was down the most; Vanguard Total Bond Market II Index saw outflows of $5.1 billion.


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