Active funds continue to get pounded, although the beating has slowed a bit. Research behemoth Morningstar reported $25 billion in active mutual fund outflows in August, but down from July’s $33 billion.
Little surprise, passive mutual funds continued to attract investor money, but it too slowed, with an estimated inflow of $16.4 billion in August, about half of July’s $33.8 billion intake.
Of the top 10 U.S. fund families, Vanguard, State Street and T. Rowe Price were the only firms in August to see flows into active funds. American Funds continued to suffer for the third consecutive month, seeing $1.5 billion in outflows in August.
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 from Morningstar’s report about U.S. asset flows in August:
- Total international-equity asset flows for August consisted of an estimated $7.3 billion outflow from developed markets and a $6.2 billion inflow to emerging markets.
- Taxable- and municipal-bond funds accumulated flows, reflecting investors’ preference for a steady income stream: $27.8 billion and $7.4 billion, respectively. Commodity funds saw a trend reversal in August with a $1 billion outflow from passive funds.
- The diversified emerging-markets category has consistently been on the top-flowing list for the past few months; in August, total flows were $5.5 billion. Factors such as stronger currencies, diminishing worries about China, and young populations driving more potential for growth going forward, are top contributors.
- The top Morningstar category remains unchanged from July: intermediate-term bond. The bottom five categories were also little changed from last month, with large growth, world allocation, and Europe stock sustaining the largest outflows. WisdomTree Europe Hedged Equity and its Deutsche counterpart, Deutsche X-trackers MSCI Europe Hedged, continued to suffer outflows.
- Vanguard continued to lead the way for passive inflows, gathering $20.7 billion in August.
- PIMCO saw two of its funds on the top-flowing list in August. PIMCO Income Fund, which has a Morningstar Analyst Rating of Silver, led flows into active funds with an estimated $1.4 billion. The highest inflow to a passive fund went to Vanguard Total Stock Market Index Fund, which took in an estimated $4.6 billion in August.
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.
