Normal market movement, or a signal of something greater?
A massive exodus from long-term, open-end mutual funds and ETFs occurred in June, the greatest outflows since August 2015.
Chicago-based research behemoth Morningstar reported that investors cut risk as money moved into bond funds.
Totaling approximately $22.1 billion, the bulk of the outflows stemmed from U.S. equity, which saw $20.8 billion leave.
Passive strategies still retained their dominance, as $17.1 billion moved from active funds and $3.7 billion from passive.
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 the report include:
- While the bulk of outflows came from U.S. equity funds, sector-equity, international-equity, allocation, alternative, and commodity funds all had net outflows. Only taxable-bond and municipal-bond funds had inflows, $15.5 and $2.6 billion, respectively. U.S. equity funds lost $20.8 billion, capping the group’s fourth-worst first half over the past decade.
- International-equity funds suffered the most outflows since 2008 with $9.8 billion in outflows, which was due largely to emerging-market outflows.
- The Morningstar Categories with the highest inflows in June were ultrashort-bond funds and foreign large-blend funds with respective inflows of $5.5 billion and $4.3 billion. Conversely, large-blend funds saw the most outflows of $19.4 billion in June followed by diversified emerging markets, with outflows of $8.0 billion.
- Among top U.S. fund families, Vanguard led the way with $7.4 billion in inflows; however, it’s growth continues to slow. June inflows were the firm’s smallest since 2013 with active funds seeing outflows of $4.5 billion while its passive strategies had inflows of $11.9 billion.
- The top fund for June was Vanguard Total International Stock Index Fund with $7.3 billion of inflows. The fund with the highest outflows was iShares MSCI Emerging Markets ETF with $5.3 billion.
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.
