It’s fine to loved, fine to be hated, but awful to be pitied. Active management just can’t catch a break, and the low cost industry flood has index funds flowing.
On Monday, Chicago-based research big Morningstar reported estimated mutual fund and exchange-traded fund asset flows for July. Active equity funds surpassed the estimated $21.7 billion in outflows in June, with $32.9 billion exiting in July.
All passive category groups, however, saw inflows during the month, led by $33.8 billion in inflows to passive equity funds. 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 July:
- Active and passive funds in the taxable bond category group led the way in terms of inflows, garnering $34 billion in July. Total outflows in the allocation category group were $3.5 billion.
- The intermediate-term bond fund category garnered the most flows for the fifth month in a row, taking in nearly $15 billion in July. The diversified emerging markets and emerging-markets bond categories joined the top five categories in July, in terms of inflows, collecting $6.5 billion and $4.6 billion, respectively.
- Investors continued to withdraw assets from funds in the large growth, Europe stock, and world allocation categories. Vanguard European Stock Index Fund experienced one of the highest outflows, losing $1.5 billion.
- Of the top 10 U.S. fund families, State Street and Vanguard were the only firms to see flows into active strategies for the second consecutive month. Fidelity and Franklin Templeton led active outflows in July, experiencing $8.9 billion and $3.8 billion in outflows, respectively. Vanguard led the way for passive inflows, gathering $21.1 billion in July.
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.
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