Morningstar Direct SM U.S. Open-End Asset Flows Update

Transcription

1 July 2014 Data through June 30 U.S. Open-End Funds Morningstar Direct SM U.S. Open-End Asset Flows Update Fund Investors Flock to Bond Funds Yet Grow Cautious on the U.S. Equity Market by Michael Rawson, CFA Also inside: Extended tables 5 U.S. equity mutual funds suffered their second-consecutive month of outflows in June, as investors withdrew $8.3 billion. It was the category group s largest outflow in 18 months. In aggregate, investors added $24.0 billion to long-term mutual funds as inflows to international-equity funds and taxable-bond funds more than offset the outflows for U.S. equity funds. Strong flows and market appreciation have allowed assets in long-term mutual funds to hit a record $11.7 trillion, more than 40% above the peak prior to the financial crisis. For the year to date, international equity leads all category groups with a $67.5 billion inflow. But given the expectation for a rise in rates, perhaps the biggest surprise so far this year is the $59.2 billion inflow into taxable-bond funds, a large increase from the $21.0 billion inflow all of last year. Estimated Net Flows $Mil* June 2014 YTD 1 Year Assets $Bil 1 Yr Organic Growth Rate % U.S. Equity (8,334) 9,508 39,964 4, Sector Equity 3,219 15,402 25, International Equity 9,635 67, ,597 1, Allocation 4,923 27,760 50,773 1, Taxable Bond 10,532 59,154 15,664 2, Municipal Bond 2,495 11,373 (36,495) 538 (6.6) Alternative 1,119 14,647 35, Commodities 459 (2,301) (10,548) 41 (22.3) All Long Term 24, , ,495 11, Money Market (14,098) (147,359) (7,794) 2,363 (0.3) *Includes liquidated and merged funds. Source: Morningstar Direct Asset Flows Note: The figures in this report were compiled on July 10, 2014, and reflect only the funds that had reported net assets by that date. The figures in both the commentary and the extended tables are survivorship-bias free. Artisan and Schwab/Laudus are not included. Important methodology note: Morningstar computes flows using the approach that is standard in the industry: Estimated net flow is the change in assets not explained by the performance of the fund. Our method assumes that flows occur uniformly over the course of the month. Adjustments for mergers are performed automatically. When liquidated funds are included, the final assets of the fund are counted as outflows. Reinvested dividends are not counted as inflows. We use fund-level reinvestment rates to improve accuracy in this respect. We make ad hoc adjustments for unusual corporate actions such as reverse share splits, and we overwrite our estimates with actual flows if managers are willing to provide the data to us. Please click here for a full explanation of our methodology Morningstar, Inc. All rights reserved.

2 Equity Fund Investors Prefer International and Sector-Specific Funds Over U.S. Growth Funds Foreign large blend led all categories with a $4.6 billion inflow. Investors added $1.6 billion to foreign large-value funds but redeemed a net $615 million from foreign large-growth funds. Gold-rated Dodge & Cox International Stock DODFX led all active international-stock funds with a $1.4 billion inflow. The fund has returned 29.3% over the past year compared with 22.5% for Gold-rated Vanguard Total International Stock Index VTIAX. Bronze-rated Thornburg International Value TGVAX saw a $1.3 billion outflow last month. The foreign large-growth fund lost one of its comanagers this past April. While investors appear to be losing patience with that fund, they are buying Bronze-rated Thornburg Developing World THDIX. The fund gained $113 million from new flows last month, and assets have now reached $3.1 billion, up from $759 million a year ago. Diversified emerging markets funds brought in $2.1 billion of new cash. American Funds Developing World Growth & Income DWGAX led all funds in the category with a $314 million inflow, pushing the fund past the $1 billion mark after launching last February. Brandes Emerging Markets BEMIX brought in $303 million. Top- and Bottom-Flowing Categories in June Excludes money markets and funds of funds Estimated Net Flow $Mil Leading June 2014 YTD 1 Year Assets $Bil 1 Yr Organic Growth Rate Foreign Large Blend 4,610 36,632 63, % Multisector Bond 3,632 12,453 8, % Intermediate-Term Bond 3,479 7,522 (57,237) 956-6% Conservative Allocation 2,633 9,348 13, % Short-Term Bond 2,520 8,146 17, % Lagging Large Growth (3,986) (18,170) (35,053) 1,200-4% Bank Loan (3,084) 1,742 32, % Large Blend (1,940) 21,236 37,297 1,603 3% Mid-Cap Growth (1,576) (3,360) (4,233) 289-2% Small Growth (1,295) (3,732) (1,300) 183-1% Source: Morningstar Direct Asset Flows Within the U.S. equity category group, investors redeemed money from growth style funds. Large outflows beset Bronze-rated American Funds Growth Fund of America AGTHX, Bronze-rated Columbia Acorn ACRNX, and Bronze-rated JPMorgan Large Cap Growth SEEGX. Investors were buying Gold-rated Oakmark OAKMX, Bronze-rated T. Rowe Price Value TRVLX, and JHancock Strategic Growth JSGAX. Putnam Capital Spectrum PVSAX attracted $240 million of new investor cash, bringing the fund to $8.5 billion from $1.2 billion two years ago. The David Glancy-managed fund invests in leveraged companies and has varied its stock, bond, and cash exposure since inception just over five years ago. The fund has returned 24.2% over the past five years, which beats the 19.8% return of the average fund in the mid-blend category. While the organic growth rate of the U.S. equity category group has been just 1% over the past year, sector equity funds have had an 8% organic growth rate. Energy limited partnership and real estate funds have led the charge Morningstar, Inc. All rights reserved.

3 Turning to bond funds, it was the fourth-straight month of inflows into the intermediate-term bond category. Over that fourmonth span, $13.7 billion has gone into the category, which is small compared with the $103 billion of outflows the category suffered from May of last year through February of this year. Multisector bond led all categories in the taxable-bond category group, attracting $3.6 billion. Bank-loan funds shed $3.1 billion in June for its third-straight month of outflows. Silver-rated Eaton Vance Floating Rate EIBLX lost $1.2 billion to outflows, a significant amount for the $13.9 billion fund. Among allocation funds that do not use the fund-of-funds structure, Bronze-rated Franklin Income FKINX, Neutral-rated BlackRock Multi-Asset Income BIICX, Neutral-rated Principal Global Diversified Income PGDIX, and Bronze-rated JPMorgan Income Builder JNBAX each received strong flows. BlackRock Multi-Asset Income surpassed $8.2 billion in assets from $3.7 billion a year ago. Among alternative funds, Bronze-rated MainStay Marketfield MFLDX suffered its third-straight month of outflows, although June s $359 million outflow from the fund was less severe than May s outflow. While investors are selling MainStay s long-short fund, they are buying other funds in the category, including Neutral-rated Neuberger Berman Long Short NLSAX, Silver-rated Robeco Boston Partners Long/Short Research BPIRX, Bronze-rated Gotham Absolute Return GARIX, and Whitebox Tactical Opportunities WBMIX. In the market-neutral category, investors redeemed $548 million from Neutral-rated PIMCO Fundamental Advantage Absolute Return Strategy PFATX. Top- and Bottom-Flowing Mutual Funds in June Excludes money markets and funds of funds Estimated Net Flow $Mil Top-Flowing Funds June 2014 YTD 1 Year Assets $Bil 1 Yr Organic Growth Rate Vanguard Total Bond Market II Index 2,033 6,329 16,351 81,829 26% Vanguard Total Intl Stock Idx 1,482 8,979 15, ,006 17% Dodge & Cox International Stock 1,413 4,776 6,438 62,825 15% PIMCO Income 1,157 5,272 6,735 37,075 24% GMO Asset Allocation Bond 1,089 1,978 4,252 4, % Bottom-Flowing Funds PIMCO Total Return (4,486) (20,159) (53,159) 225,216-20% PIMCO High Yield (1,433) (3,230) (5,652) 13,003-33% Thornburg International Value (1,270) (6,922) (9,605) 20,604-35% Eaton Vance Floating Rate (1,170) (844) 1,511 13,894 12% Fidelity Advisor Equity Growth (1,015) (1,114) (1,512) 2,771-46% Source: Morningstar Direct Asset Flows 2014 Morningstar, Inc. All rights reserved.

4 Flows by Fund Family With a $7.7 billion in inflows so far this year, Dodge & Cox is off to its strongest start since The firm, which has a svelte lineup of just six funds, is seeing strong flows to Dodge & Cox International Stock, Gold-rated Dodge & Cox Income DODIX, and Gold-rated Dodge & Cox Global Stock DODWX. Each fund has had stellar performance so far this year, with both Dodge & Cox International Stock and Dodge & Cox Global Stock ranking in the top-five percentile in their respective categories over the past year. MFS is seeing strong flows to its Silver-rated MFS Value MEIIX and Silver-rated MFS International Value MINIX, while Dimensional Fund Advisors is seeing strong flows to DFA International Real Estate Securities DFITX, Silver-rated DFA US Core Equity DFEOX, Bronze-rated DFA International Core Equity DFIEX, and Bronze-rated DFA Five-Year Global Fixed-Income DFGBX. Silver-rated Loomis Sayles Strategic Income NEFZX and Silver-rated Loomis Sayles Core Plus Bond NECRX are generating strong flows for Natixis. Both funds are in the top-five percentile of their categories over the past year. Loomis Sayles Strategic Income is a multisector-bond fund while Loomis Sayles Core Plus Bond is an intermediate-term bond fund. A pair of high-yield muni-bond funds is driving strong flows to Nuveen. Nuveen High Yield Municipal Bond NHMAX and Nuveen Short Duration High Yield Municipal Bond NVHAX have both had strong flows, rebounding from last year s negative sentiment in high-yield municipal bonds. Estimated Net Flow $Mil Leading Top-10 U.S. Mutual Fund Families Ranked by assets, excluding money markets and funds of funds. June 2014 YTD 1 Year Assets $Bil Market Share of Assets % Vanguard 7,573 64,786 92,562 2, Fidelity Investments 1,376 (3,505) (6,358) 1, American Funds (459) 582 (10,458) 1, PIMCO (5,814) (32,303) (79,241) Franklin Templeton Investments 986 3,458 1, T. Rowe Price ,626 12, Dimensional Fund Advisors 2,041 14,475 25, JPMorgan 1,674 14,746 24, OppenheimerFunds 631 5,654 11, BlackRock 1,083 7,866 15, Source: Morningstar Direct Asset Flows Call It Performance-Chasing, but Flows Follow the Stars Funds with strong performance tend to have better flows in the future. To illustrate this point, we took a look at a fund s threeyear Morningstar Rating for funds as of June 2013 and then tracked the flows over the next year. The analysis was done by share class for all funds in the U.S. equity, sector-equity, international-equity, taxable-bond, and municipal-bond category groups. Among active funds, those with 5 stars have the strongest inflows while those with just 1 or 2 stars have outflows. Three-Year Morningstar Rating as of June 2013 Active Fund Share Class Flow $ Mil % of Share Classes Index Fund Share Class Flow $ Mil % of Share Classes % 95 3% % % % 74 39% % % % -4 3% 2014 Morningstar, Inc. All rights reserved.

5 2014 Morningstar, Inc. All rights reserved.

6 Morningstar Direct SM Publishing Date: Page 1 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1-Mo YTD 1 Large Blend (1,940) 5,875 21,236 37,297 1, , Large Growth (3,986) (12,553) (18,170) (35,053) 1, Intermediate-Term Bond 3,479 9,383 7,522 (57,237) Large Value 284 2,815 5,379 17, Foreign Large Blend 4,610 12,785 36,632 63, Moderate Allocation 988 3,237 7,694 15, World Stock 1,206 1,923 7,338 15, World Allocation 470 2,606 7,661 17, Diversified Emerging Mkts 2,134 6,057 8,871 21, High Yield Bond (481) 2,661 7,139 18, Mid-Cap Growth (1,576) (4,381) (3,360) (4,233) Short-Term Bond 2,520 4,006 8,146 17, Mid-Cap Blend 338 1,618 6,357 13, Conservative Allocation 2,633 6,353 9,348 13, Small Blend (640) (1,569) 586 6, Mid-Cap Value , World Bond 1,623 3,384 6,127 4, Small Growth (1,295) (4,214) (3,732) (1,300) Multisector Bond 3,632 7,646 12,453 8, Foreign Large Value 1,637 4,580 9,147 16, Foreign Large Growth (615) (1,861) 384 4, Nontraditional Bond 1,691 7,511 20,713 47, Bank Loan (3,084) (5,957) 1,742 32, Muni National Interm 1,261 3,749 6,329 (5,300) (0.02) Small Value ,139 1, Muni National Short ,178 3, (0.02) Intermediate Government (210) (1,538) (4,861) (23,945) Health 303 (1,485) 1,956 5, Real Estate 1,093 3,299 3,843 2, Muni National Long (167) (136) (2,332) (13,666) (0.10) Inflation-Protected Bond 64 (1,371) (3,042) (22,080) Emerging Markets Bond 814 1,338 (1,553) (8,475) Corporate Bond (5,079) High Yield Muni 642 3,382 5,615 (2,339) (0.10) Ultrashort Bond ,497 8,

7 Morningstar Direct SM Publishing Date: Page 2 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1-Mo YTD 36 Long/Short Equity 819 2,276 9,371 22, Aggressive Allocation (298) Commodities Broad Basket (2,336) (10,597) Technology (15) (1,000) 384 1, Global Real Estate (221) , Natural Resources (478) Muni California Long (52) (3,699) (0.03) Foreign Small/Mid Growth (59) 2 2,028 4, Multialternative 410 1,538 4,375 10, Short Government (235) (359) (294) (4,574) (0.03) Tactical Allocation Market Neutral (312) (104) 1,690 3, Equity Energy 457 1,331 1, Utilities 202 1,005 1,246 1, Muni New York Long (72) (174) (579) (3,588) (0.15) Energy Limited Partnership 1,340 3,903 6,406 10, Europe Stock ,983 6, (0.41) Pacific/Asia ex-japan Stk (1,604) (1,608) Foreign Small/Mid Value , Muni Single State Long (65) (230) (733) (4,435) (0.20) Foreign Small/Mid Blend 343 1,056 2,201 3, Convertibles 367 1,103 2,092 4, Long-Term Bond Equity Precious Metals (78) (128) 203 (74) Muni California Intermediate (0.07) Muni Single State Interm 34 (18) (258) (1,794) (0.10) Managed Futures ,089 2, (0.92) 63 Muni Single State Short (59) (1,130) (0.32) Preferred Stock (578) Diversified Pacific/Asia (126) (343) (786) (685) Multicurrency (16) 113 (883) (2,059) Muni Pennsylvania (13) (79) (236) (1,308) (0.14) Financial 61 (236) (313) Muni New Jersey (24) (58) (161) (940) (0.28) Muni Massachusetts (8) (6) (17) (861) (0.20) 6.07

8 Morningstar Direct SM Publishing Date: Page 3 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1-Mo YTD 71 Long Government (1,228) (0.19) Bear Market (89) (106) (693) (1,753) (4.60) (9.89) 73 China Region (72) (258) (1,049) (1,162) (0.66) 74 Industrials , Miscellaneous Region 27 (24) (168) (663) Muni Ohio (10) (42) (142) (852) (0.19) Communications (18) (76) (134) (122) Muni Minnesota 10 (2) (51) (537) Japan Stock Consumer Cyclical (89) (331) (584) (328) Target Date Latin America Stock (44) (56) (268) (836) Target Date (14) 4 (15) Muni New York Intermediate (3) (12) (12) (336) (0.04) Trading-Leveraged Equity (295) Consumer Defensive (4) 93 (89) (326) Target Date (150) Target Date Target Date (63) Target Date Target Date (8) (18) (16) (140) India Equity (104) Retirement Income (4) (13) (76) (196) Target Date (31) Target Date (6) (33) (84) (156) Trading-Inverse Debt 124 (28) (71) (305) (0.45) (9.56) 97 Miscellaneous Sector Target Date Trading-Leveraged Debt (20) (0.35) Commodities Precious Metals Volatility (7.00) 102 Trading-Miscellaneous 3 5 (7) (14) (0.38) (3.93) 103 Trading-Inverse Commodities (5) 1 (34) (8) (3.73) (10.08) 104 Trading-Inverse Equity (4.35) (10.17) 105 Trading-Leveraged Commodities Top 10 6,766 34,788 91, ,723 7, , All 24,049 75, , ,495 11, ,

9 Morningstar Direct SM Publishing Date: Page 4 of 6 Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1 Vanguard 7,573 29,257 64,786 92,562 2, , Fidelity Investments 1,376 (2,064) (3,505) (6,358) 1, , American Funds (459) (415) 582 (10,458) 1, PIMCO (5,814) (16,803) (32,303) (79,241) Franklin Templeton Investments 986 2,139 3,458 1, T. Rowe Price 698 3,127 10,626 12, Dimensional Fund Advisors 2,041 6,783 14,475 25, JPMorgan 1,674 6,625 14,746 24, OppenheimerFunds 631 2,182 5,654 11, BlackRock 1,083 3,680 7,866 15, Dodge & Cox 2,254 5,221 7,707 6, MFS 1,501 3,988 8,563 14, Columbia (926) (2,271) (4,758) (11,022) Invesco (298) (1,223) John Hancock 2,109 4,553 7,762 11, Principal Funds 628 2,036 3,281 4, Lord Abbett ,408 1, Wells Fargo Advantage (268) (1,313) (539) (1,594) Janus (436) (1,794) (3,995) (10,972) Goldman Sachs 1,450 4,317 12,277 21, American Century Investments (597) (1,384) (2,301) (6,214) Hartford Mutual Funds (1,014) (1,766) (3,081) (6,619) Voya (480) (1,600) (3,085) (5,726) Harbor (168) MainStay (205) 123 3,300 11, Oakmark 1,018 3,104 7,237 15, Legg Mason 563 1,205 2,267 1, SEI (340) 146 1,929 1, First Eagle 428 1,066 2,183 4, TIAA-CREF Mutual Funds 547 2,038 3,927 6, Eaton Vance (1,741) (2,884) (3,281) (2,811) Ivy Funds (92) 553 4,091 8, Putnam 559 1,710 4,260 7, Prudential Investments ,755 1, GMO ,109 1,

10 Morningstar Direct SM Publishing Date: Page 5 of 6 Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 36 Dreyfus (71) (994) Federated ,115 (735) Thornburg (680) (2,554) (4,023) (3,831) AllianceBernstein ,873 2, Nuveen 688 1,470 2,898 1, Natixis Funds 538 1,648 3,118 4, USAA , Northern Funds ,079 2, DWS Investments 11 (342) (689) (3,239) Neuberger Berman ,486 2, AMG Funds (183) (135) (550) 2, Delaware Investments (562) Russell 73 (169) (177) (393) Pioneer Investments (94) Allianz Funds (183) (955) (1,715) (1,993) Top 10 9,789 34,512 86,387 88,415 6, , Top 50 17,668 57, , ,948 10, , Other 6,381 18,216 50,284 78,341 1, , All 24,049 75, , ,289 11, , Asset Classes Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % US Equity (8,334) (11,304) 9,508 39,964 4, , Sector Equity 3,219 7,083 15,402 25, International Equity 9,635 25,728 67, ,597 1, , Allocation 4,923 14,123 27,760 50,773 1, Taxable Bond 10,532 28,165 59,154 15,664 2, , Municipal Bond 2,495 7,581 11,373 (36,495) Alternative 1,119 3,822 14,647 35, Commodities (2,301) (10,548) All Long Term 24,049 75, , ,495 11, ,

11 Morningstar Direct SM Publishing Date: Page 6 of 6 Morningstar Ratings Name Estimated Net Flow ($mil) Total Net Assets ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % QQQQQ 14,912 49, , ,874 1, , QQQQ 9,556 27,385 88, ,807 5, , QQQ (5,578) (11,210) (21,582) (68,328) 3, , QQ (6,327) (18,489) (31,411) (72,346) Q 42 (3,063) (5,568) (15,385) Not Rated 11,444 31,989 67, , Total 24,049 75, , ,495 11, ,