Investors Choose Bond Funds in September

Minimal equity fund flows over the month resulted in bond funds accounting for 90% of September’s long-term fund net intake. Bond programs have received a majority of long-term fund flows in each month since April, with their share steadily rising since May, according to SI, which is owned by Asset International, the parent company of PLANADVISER.

International equity funds posted 5.64% returns on average (asset-weighted) and drew a net flow of $8.6 billion in September. Despite parallel, continued recovery in the domestic stock markets, investors withdrew $5 billion on a net basis from U.S.-focused equity/hybrid mutual funds. Year-to-date through September, international/global equity programs have accounted for 80% of total equity fund flows.

International equity funds outperformed U.S. equity funds by more than one percentage point in September, and have a 10 percentage point advantage year-to-date over U.S. programs, SI pointed out. International programs also retain a dramatic longer-term advantage over U.S equity funds (36 percentage points over the trailing five years).

Money-market mutual fund assets declined by nearly $130 billion in September, while ETF/ETN flows totaled close to $9 billion, and were driven by Bond, Diversified Emerging Market, Gold-Oriented, Small-Cap Core, and Dedicated Short Bias products. Year-to-date through September, ETFs/ETNs have collectively garnered an estimated $65 billion in net new flows.

An increase in net flows into target-lifecycle funds-of-funds to $3.8 billion could not offset a decline in inflows into risk-based lifecycle funds-of-funds and non-lifecycle funds-of-funds, according to the report. Total funds-of-funds net flows fell to $3.6 billion. Year-to-date, funds-of-funds have brought in a total of $30 billion in net new cash flows.

Among the largest asset management firms (firms with more than $20 billion in long-term fund assets under management), those garnering the most long-term fund flows were Vanguard ($11.8 billion); PIMCO/Allianz Global ($9.8 billion); Barclays Global Investors ($3.9 billion); JPMorgan Funds ($3.2 billion); Franklin Templeton ($3.1 billion); Fidelity ($2.3 billion); BlackRock ($1.4 billion); and T. Rowe Price ($1.1 billion).

Among smaller-size managers of long-term funds, those that led in total long-term fund flows in September were TCW, Manning & Napier, Lazard Asset Management, Rydex Investments, Van Eck, International Value Advisors, WisdomTree Asset Management, and Metropolitan West.