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

Transcription

1 August 2014 Data through July 31 Morningstar Direct SM U.S. Open-End Asset Flows Update U.S. Open-End Funds Continue to Shift From U.S. Equity to Taxable Bonds by Alina Tarlea, Sr. Markets Research Analyst July 2014 was the third-consecutive month during which investors withdrew money from U.S. equity funds. Furthermore, the outflows have grown larger as the months went by: $11.4 billion in July, compared with $8.3 billion in June and $6.9 billion in May. Overall, flows into all long-term categories remained positive at $14.4 billion, although inflows are noticeably smaller than in previous months. Because of lower valuations overseas, international-equity funds attracted $6.2 billion in July and the highest flows on a year-to-date basis. As interest rates declined so far this year, taxable-bond funds continued to receive strong inflows. For the past three months, not only have outflows from U.S. equity funds and flows into taxable-bond funds increased but the taxable-bond U.S. category group also received the largest inflows out of all categories analyzed. On a broad category group level, investors are accumulating large sums into taxable-bond funds an asset class with low potential future returns. Estimated Net Flows $Mil* July 2014 YTD 1 Year Assets $Bil 1 Yr Organic Growth Rate % U.S. Equity (11,425) (3,798) 17,878 4, Sector Equity ,945 22, International Equity 6,250 73, ,367 1, Allocation 3,074 30,825 48,719 1, Taxable Bond 11,416 69,921 27,604 2, Municipal Bond 1,421 12,791 (24,859) 539 (4.6) Alternative 2,226 16,853 33, Commodities 906 (1,395) (10,046) 40 (20.6) All Long Term 14, , ,062 11, Money Market (22,792) (172,119) (59,603) 2,340 (2.3) *Includes liquidated and merged funds. Source: Morningstar Direct Asset Flows Note: The figures in this report were compiled on Aug. 12, 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. 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 Intermediate- and Short-Term Bonds Receive Strongest Bond Inflows The shift away from risky assets was apparent within fixed-income categories. Intermediate-bond funds had the highest inflows in July, although on a trailing one-year basis their total flows still remained negative. Short-term bond funds were the third-leading category, and non-traditional-bond funds came in fifth. On the lagging side, high-yield bond and bank-loan funds suffered more outflows as investors shied away from risky credit-sensitive fixed-income because of rising credit spreads. On the equity side, U.S. large-cap flows were a bit of a dichotomy. Large blend was among the leading categories and large value and growth were among the lagging categories. Investors appeared to be selling their active U.S. equity funds to reduce risk, and any new purchases went to broad indexed funds. You can see this relationship in the top-flowing funds table, which shows Vanguard s broad U.S. equity funds at the top of the list. Non-traditional-bond funds had a 40.5% organic growth rate over the past year. Other categories with strong one-year growth rates not displayed in the table include commodities-precious metals and trading-inverse equity (with organic growth rates of 469% and 155%, respectively). Top- and Bottom-Flowing Categories in July Excludes money markets and funds of funds. 1 Yr Assets Estimated Net Flow July Organic YTD 1 Year $Mil 2014 Growth $Bil Rate % Leading Intermediate-Term Bond 6,650 14,844 (36,788) 959 (3.8) Foreign Large Blend 3,823 40,474 63, Short-Term Bond 2,817 10,970 18, Large Blend 2,619 22,443 37,077 1, Nontraditional Bond 2,514 23,227 43, Lagging Bank Loan (1,916) (175) 22, Mid-Cap Growth (2,003) (5,497) (5,956) 286 (2.3) Large Value (2,632) 2,777 11, Large Growth (7,512) (25,744) (41,420) 1,175 (4.0) High Yield Bond (7,846) (697) 5, Morningstar, Inc. All rights reserved.

3 Top- and Bottom-Flowing Mutual Funds in July Excludes money markets and funds of funds. Estimated Net Flow $Mil 1 Yr Assets July Organic YTD 1 Year 2014 Growth $Bil Rate % Top-Flowing Funds Vanguard Total Stock Market Index Fund 2,636 17,844 25, Vanguard Institutional Index Fund 2,213 3,366 7, Vanguard Total Intl Stock Idx Fund 1,812 10,792 16, PIMCO Long Term U.S. Government Fund 1,457 1, Vanguard Total Bond Market II Index Fund 1,455 7,784 16, Bottom-Flowing Funds Fidelity Growth Company Fund (1,858) (7,130) (11,911) 40 (24.1) Fidelity Contrafund Fund (1,676) (7,844) (9,025) 106 (9.2) PIMCO High Yield (1,232) (4,462) (7,190) 12 (40.1) BlackRock High Yield Bond Portfolio (1,187) 219 1, Vanguard Five Hundred Index Fund (1,160) 591 (3,399) 157 (2.5) Source: Morningstar Direct Asset Flows The largest index funds from Vanguard continued to attract strong investor flows. Even though U.S. equity funds had outflows this month, the two largest U.S. equity index funds received the highest July flows. It seems that investors still like U.S. equity funds, as long as they come with low fees and are passively managed. As high-yield bond was the category with the largest outflows, it was not surprising to see PIMCO High Yield and BlackRock High Yield Bond among the bottom-flowing funds. PIMCO High Yield had a negative 40.1% one-year organic growth rate, while PIMCO Long Term U.S. Government quadrupled in size in the past month because of a very large inflow Morningstar, Inc. All rights reserved.

4 Estimated Net Flow $Mil Leading Top-10 U.S. Mutual Fund Families Ranked by assets, excluding money markets and funds of funds. July 2014 YTD 1 Year Assets $Bil 1 Yr Organic Growth Rate % Vanguard 12,262 77, ,135 2, Fidelity Investments (6,238) (9,743) (12,684) 1,196 (1.2) American Funds (740) (158) (9,557) 1,144 (0.9) PIMCO (870) (33,173) (72,726) 502 (13.1) Franklin Templeton Investments (165) 3,284 2, T. Rowe Price ,852 12, JPMorgan 2,752 17,499 23, Dimensional Fund Advisors 2,296 16,771 25, OppenheimerFunds (401) 5,253 9, BlackRock (588) 7,278 13, Source: Morningstar Direct Asset Flows Fidelity had the highest outflows this past month because two of its flagship active U.S. equity funds had very large outflows. As usual, Vanguard, with four top-flowing funds and one bottom-flowing, received the highest inflows. Investors withdrew money from PIMCO for the 14 th month in a row, although July outflows were the smallest out of those 14 months. PIMCO flagship Total Return fund suffered an $830 million outflow this month, which is an improvement from the negative $4.4 billion average of the past 12 months Morningstar, Inc. All rights reserved.

5 2014 Morningstar, Inc. All rights reserved. Flows Shift From High-Credit-Risk to Traditional Fixed-Income Categories Over the past year, flows into intermediate-term bond funds changed from negative to positive, while the opposite happened with flows into bank-loan and high-yield-bond funds. For investors, risk aversion is becoming more dominant than the search for returns.

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 2,619 2,619 22,443 37,077 1, , (1.71) Large Growth (7,512) (7,512) (25,744) (41,420) 1, , (1.53) Intermediate-Term Bond 6,650 6,650 14,844 (36,788) (0.28) Large Value (2,652) (2,652) 2,756 11, (1.83) Foreign Large Blend 3,839 3,839 40,490 63, (2.41) Moderate Allocation ,282 13, (1.45) World Stock (628) (628) 6,772 14, (2.35) World Allocation (315) (315) 7,346 15, (1.49) Diversified Emerging Mkts 1,748 1,748 10,532 20, High Yield Bond (7,933) (7,933) (784) 5, (1.24) Short-Term Bond 2,816 2,816 10,970 18, (0.17) Mid-Cap Growth (1,925) (1,925) (5,419) (5,878) (3.46) Mid-Cap Blend 1,606 1,606 7,963 13, (3.54) Conservative Allocation 1,958 1,958 11,306 15, (1.10) World Bond 2,396 2,396 8,494 6, (0.54) Mid-Cap Value (648) (648) (691) 1, (3.27) Small Blend (844) (844) (235) 4, (5.46) (1.88) 18 Multisector Bond ,324 7, (0.52) Small Growth (1,780) (1,780) (5,550) (3,895) (5.71) (4.89) 20 Foreign Large Value 1,344 1,344 10,519 17, (2.47) Foreign Large Growth (582) (582) (86) 3, (2.69) Nontraditional Bond 2,514 2,514 23,227 43, (0.08) Bank Loan (1,916) (1,916) (175) 22, (0.12) Muni National Interm 1,407 1,407 7,740 (1,272) Muni National Short 1,103 1,103 4,281 4, Small Value (37) (37) (5.19) (0.71) 27 Intermediate Government (279) (279) (5,143) (19,337) (0.34) Health ,000 4, (1.10) Real Estate ,092 3, (0.12) Muni National Long (117) (117) (2,450) (11,353) Inflation-Protected Bond (2,170) (18,430) (0.08) Emerging Markets Bond 2,157 2, (6,116) (0.44) Corporate Bond (3,488) (0.25) Ultrashort Bond 1,355 1,355 3,852 9, High Yield Muni (569) (569) 5,045 (1,066)

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 ,886 21, (1.19) Aggressive Allocation (2) (1.89) Commodities Broad Basket (1,452) (10,105) (4.38) Technology (78) (78) 307 1, (1.74) Global Real Estate (130) (130) 760 1, Muni California Long (41) (41) (94) (2,959) Natural Resources (73) (73) (43) (514) (3.50) Foreign Small/Mid Growth (42) (42) 1,970 4, (2.80) Multialternative ,873 9, (0.72) Short Government (28) (28) (317) (3,291) (0.17) Tactical Allocation ,550 1, (1.55) Market Neutral ,461 3, (0.16) Equity Energy (60) (60) 1, (5.00) Energy Limited Partnership 1,128 1,128 7,534 11, (3.20) Muni New York Long (197) (197) (776) (3,268) Utilities ,462 1, (5.44) Pacific/Asia ex-japan Stk (1,454) (1,405) Europe Stock (106) (106) 2,877 6, (4.35) (1.20) 54 Muni Single State Long (74) (74) (808) (3,745) Foreign Small/Mid Value , (3.05) Long-Term Bond , Foreign Small/Mid Blend ,364 3, (2.88) Convertibles ,131 3, (1.91) Equity Precious Metals (167) (2.32) Muni California Intermediate , Muni Single State Interm (46) (46) (305) (1,526) Managed Futures ,282 2, (0.44) (1.04) 63 Preferred Stock ,061 (282) (0.19) Muni Single State Short (94) (94) (153) (1,144) (0.17) Diversified Pacific/Asia (21) (21) (790) (718) Multicurrency (796) (1,535) (0.43) Muni Pennsylvania (44) (44) (281) (1,154) Financial (147) (147) (458) (2.14) Long Government 1,560 1,560 1, Muni New Jersey (35) (35) (196) (824)

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 Muni Massachusetts (23) (23) (40) (685) Bear Market (474) (1,440) (8.53) 73 China Region (20) (20) (1,071) (1,271) Miscellaneous Region (29) (29) (197) (562) (1.87) Muni Ohio (12) (12) (154) (714) (0.01) Industrials (400) (400) (75) (4.61) Communications (37) (37) (172) (142) (1.05) Muni Minnesota 0 0 (52) (435) Japan Stock ,007 1, (0.44) Consumer Cyclical (259) (259) (843) (735) (2.87) (1.66) 81 Muni New York Intermediate 4 4 (8) (272) Latin America Stock (22) (22) (290) (732) Target Date (1) (1) (1.54) Target Date (20) (20) (20) (22) (1.25) Trading-Leveraged Equity (100) (100) (395) (2.08) Consumer Defensive (56) (304) (3.41) Target Date (7) (7) 29 (135) (1.49) Target Date (1.74) Target Date (3) (3) 51 (57) (1.78) Target Date (1.80) India Equity (50) Target Date (8) (8) (24) (124) (1.14) Retirement Income (9) (9) (85) (178) (0.96) Target Date (23) (1.90) Target Date (14) (14) (98) (150) (1.05) Trading-Inverse Debt (43) (43) (114) (9.34) 97 Miscellaneous Sector (3.39) (1.03) 98 Trading-Leveraged Debt (571) Target Date (1.91) Commodities Precious Metals (3.29) Volatility Trading-Miscellaneous (0.08) (4.07) 103 Trading-Inverse Equity (3.28) (12.97) 104 Trading-Inverse Commodities 1 1 (33) (12) (6.61) 105 Trading-Leveraged Commodities (1) (6.01) Top 10 (3,596) (3,596) 86, ,852 7, , All 14,393 14, , ,059 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 12,262 12,262 77, ,135 2, , Fidelity Investments (6,238) (6,238) (9,743) (12,684) 1, , American Funds (740) (740) (158) (9,557) 1, , PIMCO (870) (870) (33,173) (72,726) Franklin Templeton Investments (165) (165) 3,284 2, T. Rowe Price ,852 12, JPMorgan 2,752 2,752 17,499 23, Dimensional Fund Advisors 2,296 2,296 16,771 25, OppenheimerFunds (401) (401) 5,253 9, BlackRock (588) (588) 7,278 13, Dodge & Cox 1,052 1,052 8,759 7, MFS ,547 14, Columbia (157) (157) (4,915) (10,132) Invesco (90) (90) (390) (1,463) John Hancock ,250 10, Principal Funds ,716 3, Lord Abbett (108) (108) 1,300 1, Wells Fargo Advantage (479) (479) (1,018) (1,721) Goldman Sachs 1,126 1,126 13,405 21, Janus (662) (662) (4,657) (9,458) American Century Investments (118) (118) (2,419) (5,807) Hartford Mutual Funds (557) (557) (3,634) (6,448) Voya (706) (706) (3,791) (6,130) Harbor MainStay (1,112) (1,112) 2,564 10, Oakmark ,886 15, Legg Mason ,792 1, SEI ,422 1, GMO ,098 (877) First Eagle ,487 4, Eaton Vance (971) (971) (4,255) (4,564) TIAA-CREF Mutual Funds (9) (9) 3,919 6, Ivy Funds (957) (957) 3,134 7, Putnam ,712 7, Prudential Investments ,967 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 ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 36 Dreyfus (107) (107) 478 (1,174) Federated , Thornburg (751) (751) (4,774) (4,598) AllianceBernstein ,933 2, Nuveen ,992 1, Natixis Funds ,023 4, USAA , Northern Funds ,150 2, DWS Investments (44) (44) (732) (3,099) Delaware Investments (320) Neuberger Berman ,571 2, Russell (18) (18) (195) (335) AMG Funds (308) (308) (858) 1, DoubleLine ,357 (4,447) Metropolitan West Funds ,815 6, Top 10 8,535 8,535 94,913 94,720 6, , Top 50 12,174 12, , ,352 9, , Other 2,219 2,219 44,985 71,145 1, , All 14,393 14, , ,497 11, , Asset Classes Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % US Equity (11,174) (11,174) (3,547) 18,128 4, , Sector Equity ,945 22, International Equity 6,082 6,082 73, ,199 1, , Allocation 3,074 3,074 30,825 48,719 1, Taxable Bond 11,329 11,329 69,835 27,518 2, , Municipal Bond 1,421 1,421 12,791 (24,859) Alternative 2,226 2,226 16,853 33, Commodities (1,395) (10,046) All Long Term 14,393 14, , ,059 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 26,981 26, , ,708 1, , QQQQ 1,494 1,494 88, ,907 4, , QQQ (12,527) (12,527) (31,752) (70,085) 3, , QQ (7,805) (7,805) (42,053) (82,664) Q (1,690) (1,690) (6,936) (14,063) Not Rated 7,941 7,941 72, , Total 14,393 14, , ,059 11, ,