Passive Mutual Funds Beat Active Funds in June

It’s getting bloody, and spectators are about to beg active mutual funds to “stay down.”

Chicago-based research and consulting firm Morningstar reported Monday on estimated U.S. mutual fund and exchange-traded fund (ETF) asset flows for June. It found active U.S.-equity funds posted an estimated $21.7 billion in outflows in June as all active category groups—except municipal bond—saw outflows for the month.

Meanwhile, all passive category groups experienced inflows, except for alternatives. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETFs by computing the change in shares outstanding.

Highlights (or lowlights, depending on the particular management strategy) from Morningstar’s report include:

While Britain’s vote regarding its exit from the European Union dominated the news in June, it had little effect on flows: investors withdrew $56 million from international equity funds while the MSCI Europe, Australasia, and Far East (EAFE) Index declined 3.4 percent in June.
Flows into commodities spiked again in June, fueled by precious-metals funds, with the majority of flows into gold ETFs. SPDR Gold Shares led the way with an estimated net inflow of $3.5 billion.
The intermediate-term bond and foreign large blend fund categories garnered the most flows for the second month in a row, taking in $10.8 billion and $5.8 billion, respectively.
Of the top 10 U.S. fund families, State Street and Vanguard were the only firms to see flows into active strategies in June, raking in $238 million and $3.3 billion, respectively. Vanguard and BlackRock/iShares led flows into passive strategies during the month, with $16.8 billion and $9.9 billion, respectively.
American Funds American Balanced, which has aMorningstar Analyst Rating™ of Silver, led flows into active funds in June, garnering $1.2 billion during the month.

John Sullivan

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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.