ETFs, Mutual Funds Earn $2T

Data from Strategic Insight, an Asset International company, shows since November 2008, mutual fund investors have deposited a net of nearly $1.9 trillion into stock and bond mutual funds and ETFs. With the recovery of the financial markets over the past five years, mutual funds investors benefitted from close to $6 trillion of wealth added to their holdings during this period, about one-third of which occurred in 2013.

“For 2014, we should witness the continuation of investors’ re-engagement,” says Avi Nachmany, Strategic Insight’s director of research. “And demand should remain across a wide spread of investment approaches, including many bond funds, as the fund industry’s DNA of asset allocation dictates diversification across strategies and around the world.”

Approximately $30 billion was net deposited into long-term stock and bond funds (including ETFs) in November. Equity mutual funds and ETFs collectively brought in $43 billion in November, while bond mutual funds and ETFs experienced $13 billion of net redemptions. For all of 2013, taxable bond flows remained positive at $46 billion, while tax-free bond funds experienced nearly matching net redemptions.

Excluding ETFs, equity funds netted $31 billion in November and $281 billion in 2013, due to strong demand in both domestic and international strategies. Growth and income, international growth, international total return, and emerging market equity have been the best-selling equity objectives in 2013. Aggregate inflows to diversified international/global funds in 2013 exceeded the amount garnered by such funds over the past four years combined. Similar to recent months, bond fund strategies positioned for a rising interest rate environment, such as floating rate, short maturity, unconstrained, and high yield, continued to benefit from positive flows.

Fidelity, Vanguard and DFA led monthly net inflows in domestic and international equity funds, including active and passive mutual funds, but excluding ETFs. Edward Jones, Vanguard and DFA were the monthly flow leaders for bond funds during November.

U.S. equity exchange-traded products, or ETPs, (including ETFs and exchange-traded notes) netted $12 billion during November. Growth and income, international growth and miscellaneous sectors were the leading equity objectives in ETP flows in November. Corporate short maturity, corporate floating rate, and government short maturity stood out as leading bond ETP objectives in November, each bringing in hundreds of millions in net new flows.

“The 2013 flows to ETPs could near $200 billion, as December is likely to experience increased flows due to year-end tax-driven rebalancing into ETFs,” says Alan Hess, a Strategic Insight analyst. “ETP assets could break the $2 trillion mark by year-end 2014.”

Year to date through October 2013, intermediary-sold (including private bank, independent, regional, RIA, and most wirehouse broker/dealers) channels aggregately drove $247 billion of equity mutual fund and ETF inflows. Approximately 60% of inflows went into actively managed equity funds for the year-to-date period, but passive strategies took in about 60% of inflows into equity funds held by intermediaries within the month of October.

Distribution channel data attributed to Strategic Insight Simfund Pro 7.0 and Access Data, a Broadridge company. More about Strategic Insight is at www.sionline.com.