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

Transcription

1 May 2014 Data through April 30 U.S. Open-End Funds Also inside: Extended tables... 5 Morningstar Direct SM U.S. Open-End Asset Flows Update Not All Firms Seeing Outflows From Active Equity Funds by Michael Rawson, CFA Investors added $27.7 billion to long-term mutual funds in April, driven by continued strong flows to equity funds along with resurgent flows to bond funds. After strong outflows last year, core, intermediate-term bond funds had inflows for the second month in a row, bringing in $3.3 billion last month, while municipal-bond funds brought in $1.3 billion for their fourth consecutive month of inflows. While U.S.-equity funds have accumulated $25.2 billion in the first four months of the year, marking the strongest start since 2004, most of these flows went to passive funds. Active U.S.-equity funds have experienced $5.7 billion in outflows so far this year, yet a number of firms have successfully attracted flows in this area. Estimated Net Flows $Mil* April 2014 YTD 1 Year Assets $Bil U.S. Equity 4,353 25,242 54,082 4,669 Sector Equity 1,472 9,663 21, International Equity 7,335 49, ,965 1,825 Allocation 4,609 18,542 47,998 1,093 Taxable Bond 8,012 38,609 (32,342) 2,558 Municipal Bond 1,344 5,136 (59,794) 526 Alternative ,639 38, Commodities (398) (3,347) (11,745) 40 All Long Term 27, , ,498 11,270 Money Market (59,079) (145,659) (841) 2,523 *Includes liquidated and merged funds. Source: Morningstar Direct Asset Flows. Note: The figures in this report were compiled on May 9, 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 Passive Flows Drive Flows to the Large-Blend Category Large-blend and foreign large-blend led all Morningstar Categories in terms of inflows. Passive funds have a large share of assets in both of these categories. Among active U.S. fund investors, the value side of the Morningstar Style Box remains popular compared with growth styles. This may be driven by investors preference for the higher dividend yields available in that style. Large-growth funds had outflows even after excluding American Funds Growth Fund of America, which has experienced net redemptions for 51 straight months. Morningstar Categories Estimated Net Flow $Mil Leading Top- and Bottom-Flowing Categories in April Excludes money markets and funds of funds April 2014 YTD 1 Year Assets $Bil Large Blend 4,761 20,274 37,015 1,544 Foreign Large Blend 4,229 29,504 66, Intermediate-Term Bond 3,347 1,488 (95,362) 941 Nontraditional Bond 2,648 15,844 55, Multisector Bond 1,992 6,711 (618) 180 Lagging Large Growth (1,778) (7,408) (28,181) 1,142 Health (1,336) 2,105 6, Bank Loan (1,168) 6,530 48, Inflation-Protected Bond (1,146) (2,816) (27,863) 78 Mid-Cap Growth (1,112) (253) (2,646) 273 Source: Morningstar Direct Asset Flows. Sector investing continues to draw favor among tactical investors, yet investors pulled money from health-care, technology, and financials sector funds last month, and they added money to real estate and utilities sector funds. Last month, Morningstar introduced a new equity sector category, energy limited partnership. Including exchange-traded products, the category has 38 funds and $39 billion in assets, which ranks eighth out of 15 sector categories by assets. Most of these funds were previously in the equity energy sector, but the unique characteristics of the master limited partnership vehicle justifies separating energy limited partnerships as a distinct category Morningstar, Inc. All rights reserved.

3 2014 Morningstar, Inc. All rights reserved. Neutral-rated Goldman Sachs Strategic Income GSZIX continued to draw strong inflows, while Neutral-rated PIMCO Unconstrained Bond PFIUX again suffered outflows, highlighting the divergent fortunes of two prominent non-traditional-bond funds. That category has held up while another noncore bond category, bank loan, is now facing outflows after experiencing inflows throughout last year. The $1.2 billion outflow from the bank-loan category is the first monthly outflow since June Non-traditional-bond funds are promoted as vehicles that can make money in any environment because of long-short bets. However, bank-loan funds will likely perform well only during periods of stable or tightening credit spreads. The multisector bond category returned to the ranks of category leaders for the first time since the end of 2012, thanks to a $951 million inflow into Silver-rated PIMCO Income PIMIX. That fund has been the lone bright spot for PIMCO from a flows perspective, as the firm has shed $80 billion through outflows over the past year. Top- and Bottom-Flowing Funds in April Excludes money markets and funds of funds Estimated Net Flow $Mil Top-Flowing Funds April 2014 YTD 1 Year Assets $Bil Vanguard Total Stock Market Index Fund 3,630 12,252 21, ,110 Goldman Sachs Strategic Income Fund 1,384 7,574 17,891 22,030 Vanguard Total Bond Market II Index Fund 1,221 3,324 4,203 77,939 Fidelity Advisor Total Bond Fund 1,185 1, ,461 Oppenheimer International Growth Fund 1,107 3,254 6,180 17,741 Bottom-Flowing Funds PIMCO Total Return Fund (3,128) (11,379) (55,264) 230,431 Thornburg International Value Fund (1,119) (4,274) (7,461) 22,813 Scout International Fund (774) (1,253) (1,300) 8,921 PIMCO Unconstrained Bond Fund (721) (3,450) (908) 23,753 American Funds Growth Fund of America (653) (2,385) (8,556) 136,298 Source: Morningstar Direct Asset Flows Two funds have bucked the trend of inflows into international developed-markets funds. Silver-rated Thornburg International Value TGVIX has lost $6.2 billion to outflows over the past six months, while Neutral-rated Scout International UMBWX lost $774 million last month. Both funds are undergoing changes in portfolio management, yet the outflows at the Thornburg fund may also be performance-related. On the other end of the spectrum, strong performance is likely driving inflows into Silver-rated Oppenheimer International Growth OIGAX. The fund s assets have reached $17.7 billion from $9.6 billion a year ago. It has returned 9.3% annualized for the three years through April 2014 compared with 0.3% for TGVIX. Top-10 U.S. Open-End Fund Families Ranked by assets, excluding money markets and funds of funds Estimated Net Flow $Mil Assets $Bil Fund Family April 2014 YTD 1 Year Vanguard 10,101 45,630 76,747 2,027 Fidelity Investments (435) (1,875) (7,792) 1,174 American Funds 758 1,754 (14,390) 1,125 PIMCO (5,494) (20,995) (79,936) 508 Franklin Templeton Investments 579 1, T. Rowe Price 1,199 8,697 10, JPMorgan 2,785 10,906 20, Dimensional Fund Advisors 2,688 10,380 24, OppenheimerFunds 940 4,412 12, BlackRock 1,053 5,236 13, Source: Morningstar Direct Asset Flows

4 JPMorgan, MFS, and Putnam Lead Flows to Actively Managed U.S. Equity Over the past six months, active U.S. equity mutual funds have had outflows of $3.2 billion. JPMorgan led all firms with a $6.7 billion inflow. The funds driving the inflows to JPMorgan, by order of fund flows, include Silver-rated JPMorgan Value Advantage JVAAX, JPMorgan Disciplined Equity JDEAX, Bronze-rated JPMorgan Equity Income OIEIX, Bronze-rated JPMorgan US Equity JUEAX, JPMorgan Growth Advantage VHIAX, JPMorgan US Large Cap Core JLCAX. Top Ten Firms by Six Month Flows to Active U.S. Equity Funds Top-Flowing Funds JPMorgan MFS Putnam John Hancock Vanguard Oakmark Legg Mason T. Rowe Price PRIMECAP Odyssey Funds Franklin Templeton Investments Top Ten All Firms Estimated Net Flow Past Six Months $Bil Assets $Bil Organic Growth Rate Market Share of Assets % 3% % 2% % 1% % 1% % 6% % 1% % 1% % 6% % 0% % 2% % 24% (3.2) 3,451 (0.1)% 100% Source: Morningstar Direct Asset Flows. Of the $6.7 billion active U.S.-equity inflows that JPMorgan funds attracted, $4.7 billion went into institutional share classes, while retirement share classes collected $2.6 billion. Load-based, A share classes collected $1.1 billion. JPMorgan US Equity was the most popular fund for institutional share class investors, while JPMorgan Disciplined Equity was the most popular for retirement share class investors. Both of these funds fall in the large-blend category. Among JPMorgan A share class investors, the most popular funds were JPMorgan Value Advantage and JPMorgan Equity Income, both of which are in the large-value category. Each of these four funds has 4 or 5 stars. What is remarkable about the $1.1 billion inflow into active U.S.-equity A share classes at JPMorgan is that, among all firms, A share classes had outflows of $9.2 billion over the past six months. Assets in A share classes have dropped to 23% of all active U.S.-equity fund assets from 27% five years ago. This trend especially hurt American Funds ($4.3 billion outflow), Columbia ($1.6 billion), and Invesco ($1.1 billion). However, some firms A share classes attracted inflows. The A share classes of Putnam s actively managed equity funds also attracted $1.1 billion in inflows. Franklin Templeton pulled in slightly less than $900 million while John Hancock attracted $606 million. MFS came in fifth with about $500 million. The flows to Putnam have been driven by Putnam Capital Spectrum PVSAX and Putnam Equity Spectrum PYSAX. Both of these funds invest in equities and corporate bonds and are managed David Glancy, formerly of Fidelity. Both funds will reach their fiveyear mark since inception at the end of May and currently sport 5-star Morningstar Ratings thanks to stellar performance and a tactical strategy that defies simple categorization. Putnam Capital Spectrum has $7.6 billion in assets and has returned 23.3% annualized since inception with a Sharpe ratio of 1.8. Putnam Equity Spectrum has $3.9 billion in assets and has returned 26.9% since inception with a Sharpe ratio of 1.7. Those numbers trounce the 19.4% annualized return and a 1.2 Sharpe ratio for the midcap value category over the same time period. MFS has seen strong flows to the institutional and retirement share classes of Silver-rated MFS Value MEIIX, as well as the institutional share class of Silver-rated MFS Growth MFEIX. The A share class of Bronze-rated MFS Massachusetts Investors Growth Stock MIGFX and MFS Growth have had decent flows. Similarly, the A share classes of Bronze-rated Franklin Rising Dividends FRDPX, Franklin DynaTech FKDNX, and Franklin Small Cap Growth FSGRX have each enjoyed strong flows Morningstar, Inc. All rights reserved.

5 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 4,761 4,761 20,274 37,015 1, , Large Growth (1,778) (1,778) (7,408) (28,181) 1, (1.36) (0.89) 3 Intermediate-Term Bond 3,347 3,347 1,488 (95,362) , Large Value 1,946 1,946 4,454 15, Foreign Large Blend 4,229 4,229 29,504 66, Moderate Allocation 1,062 1,062 6,001 16, World Stock ,906 17, World Allocation 1,459 1,459 6,750 19, High Yield Bond 1,012 1,012 5,297 4, Diversified Emerging Mkts 1,350 1,350 4,237 23, (0.14) 11 Mid-Cap Growth (1,112) (1,112) (253) (2,646) (2.80) (1.63) 12 Short-Term Bond 1,174 1,174 5,167 15, Mid-Cap Blend ,369 12, (1.07) Conservative Allocation 1,773 1,773 4,779 10, Small Blend (231) (231) 1,882 7, (2.62) (1.18) 16 World Bond ,718 16, Multisector Bond 1,992 1,992 6,711 (618) Small Growth (997) (997) (531) 1, (5.17) (4.89) 19 Foreign Large Growth (910) (910) (110) 3, (0.27) 20 Foreign Large Value 1,418 1,418 5,984 13, Mid-Cap Value ,344 8, (0.48) Bank Loan (1,168) (1,168) 6,530 48, Nontraditional Bond 2,648 2,648 15,844 55, Muni National Interm 1,048 1,048 3,633 (11,792) Muni National Short (746) (746) 1,942 2, Small Value ,109 2, (1.76) (0.09) 27 Intermediate Government (797) (797) (4,078) (30,326) Muni National Long (18) (18) (2,217) (16,999) Health (1,336) (1,336) 2,105 6, (3.34) Real Estate , Inflation-Protected Bond (1,146) (1,146) (2,816) (27,863) Emerging Markets Bond (319) (319) (3,199) (12,024) Corporate Bond (7,784) Ultrashort Bond (348) (348) 2,058 9, High Yield Muni 1,278 1,278 3,511 (9,185)

6 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 ,016 23, (0.22) Aggressive Allocation (177) Commodities Broad Basket (388) (388) (3,362) (11,774) Technology (323) (323) 1,062 3, (3.64) (1.29) 40 Global Real Estate , Muni California Long (214) (5,087) Foreign Small/Mid Growth ,139 5, (1.00) Short Government (4,745) Multialternative ,360 10, Natural Resources (39) (39) (151) (1,605) Market Neutral (191) (191) 1,552 3, (0.16) Tactical Allocation (309) (989) Equity Energy (1,422) Muni New York Long (89) (89) (493) (4,657) Utilities Europe Stock ,519 6, Muni Single State Long (121) (121) (624) (5,234) Pacific/Asia ex-japan Stk (1,845) (2,058) Energy Limited Partnership 1,363 1,363 3,860 10, Foreign Small/Mid Value , Long-Term Bond (4) (4) 730 (591) Foreign Small/Mid Blend ,358 3, Convertibles ,206 3, (0.29) Equity Precious Metals (639) Muni Single State Interm (31) (31) (271) (2,219) Muni California Intermediate (31) Managed Futures ,162 3, (2.08) 63 Muni Single State Short (53) (53) (136) (1,364) Preferred Stock (1,415) Diversified Pacific/Asia (115) (115) (558) (0.62) (2.78) 66 Multicurrency (108) (108) (1,104) (2,327) Muni Pennsylvania (49) (49) (206) (1,534) Financial (194) (194) (271) (2.11) (0.49) 69 Muni New Jersey (20) (20) (122) (1,162) Muni Massachusetts (7) (7) (17) (1,085)

7 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 Bear Market (97) (97) (683) (883) (2.17) 72 Long Government (20) (20) 125 (1,671) China Region (80) (80) (874) (1,371) (2.66) (6.84) 74 Miscellaneous Region (40) (40) (185) (996) (0.33) 75 Industrials Muni Ohio (24) (24) (125) (998) Muni Minnesota (15) (15) (64) (670) Communications (22) (22) (80) (113) (0.77) (1.91) 79 Consumer Cyclical (112) (112) (365) (83) (1.50) (2.59) 80 Japan Stock (15) (1.92) (5.57) 81 Muni New York Intermediate (8) (8) (7) (435) Latin America Stock (9) (9) (221) (1,088) Target Date (20) (20) (2) Target Date (1) (1) Consumer Defensive (145) (516) Target Date (20) (20) 11 (172) Trading-Leveraged Equity (305) (305) (681) (0.84) (0.63) 88 Target Date (3) (3) Target Date (9) (9) 42 (51) Target Date Target Date (10) (10) (8) (153) Retirement Income (4) (4) (67) (220) Target Date (1) (1) 31 (14) India Equity 7 7 (41) (248) Target Date (20) (20) (71) (166) Miscellaneous Sector (1.50) (0.23) 97 Trading-Inverse Debt (196) (196) (239) (1.34) (6.72) 98 Trading-Leveraged Debt (214) Target Date Volatility (4.17) 101 Trading-Inverse Commodities (24) (3.21) (8.90) 102 Commodities Precious Metals (10) (10) Trading-Miscellaneous 1 1 (12) (3) (0.76) (2.88) 104 Trading-Inverse Equity (3.55) (3.27) 105 Trading-Leveraged Commodities (1) Top 10 17,873 17,873 76,502 75,925 6, , All 27,653 27, , ,498 11, ,

8 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 10,101 10,101 45,630 76,747 2, , Fidelity Investments (435) (435) (1,875) (7,792) 1, , American Funds ,754 (14,390) 1, PIMCO (5,494) (5,494) (20,995) (79,936) Franklin Templeton Investments , T. Rowe Price 1,199 1,199 8,697 10, JPMorgan 2,785 2,785 10,906 20, Dimensional Fund Advisors 2,688 2,688 10,380 24, OppenheimerFunds ,412 12, BlackRock 1,053 1,053 5,236 13, Columbia (685) (685) (3,172) (12,516) MFS 1,313 1,313 5,888 15, Dodge & Cox 1,700 1,700 4,186 2, Invesco (346) (1,674) John Hancock ,789 9, Lord Abbett , Principal Funds ,096 4, Wells Fargo Advantage (363) (363) 411 (1,335) Janus (660) (660) (2,861) (12,121) American Century Investments (372) (372) (1,289) (6,267) Hartford Mutual Funds (288) (288) (1,604) (7,491) Goldman Sachs 1,240 1,240 9,201 20, Voya (606) (606) (2,092) (4,933) Harbor (472) MainStay ,438 13, SEI ,311 1, Oakmark 1,069 1,069 5,203 15, Legg Mason , Eaton Vance (955) (955) (1,666) (68) GMO , Ivy Funds ,019 8, First Eagle ,491 4, TIAA-CREF Mutual Funds ,710 6, Putnam ,207 6, Prudential Investments ,056 1,

9 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 ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 36 Dreyfus (1,355) Thornburg (755) (755) (2,224) (1,628) Federated (256) (256) 549 (3,082) AllianceBernstein (190) (190) 2,329 1, Nuveen ,366 (502) Natixis Funds ,992 2, USAA Northern Funds , DWS Investments (526) (526) (873) (4,349) AMG Funds (34) (34) (450) 3, Russell (255) (255) (263) (509) Neuberger Berman , Delaware Investments (1,027) Allianz Funds (543) (543) (1,303) (2,498) Pioneer Investments (159) (159) 221 (505) Top 10 14,172 14,172 66,044 57,224 6, , Top 50 21,267 21, , ,700 9, , Other 6,386 6,386 36,893 61,114 1, , All 27,653 27, , ,813 11, , Asset Classes Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % US Equity 4,353 4,353 25,242 54,082 4, , Sector Equity 1,472 1,472 9,663 21, International Equity 7,335 7,335 49, ,965 1, , Allocation 4,609 4,609 18,542 47,998 1, Taxable Bond 8,012 8,012 38,609 (32,342) 2, , Municipal Bond 1,344 1,344 5,136 (59,794) Alternative ,639 38, Commodities (398) (398) (3,347) (11,745) All Long Term 27,653 27, , ,498 11, ,

10 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 16,613 16,613 72, ,441 1, , QQQQ 16,986 16,986 71,994 89,874 4, , QQQ (8,725) (8,725) (18,761) (103,390) 3, , QQ (6,009) (6,009) (16,302) (72,350) Q (1,196) (1,196) (3,939) (16,570) Not Rated 9,984 9,984 48, , Total 27,653 27, , ,498 11, ,