The Markets March 15, 2016

Investors Favored Passive Funds in February

Net outflows from active funds totaled $3.9 billion during the month.
Reported by

Net new investment to long-term mutual funds and exchange-traded funds (ETFs) totaled $16.1 billion in February, according to Strategic Insight, an Asset International company.

Demand for index funds persisted, as passive stock and bond funds netted $19.9 billion. Net outflows from active funds totaled $3.9 billion during the month.

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Equity funds attracted $1.2 billion in February, with $4.7 billion of net inflows to International/Global products. Active International Equity mutual funds netted $6 billion during the month, led by diversified ex-U.S. equity funds.

Large-capitalization U.S. stock strategies continued to drive aggregate net outflows from active U.S. Equity funds. Among passive Equity products, high-inflow strategies during the month included diversified US Equity Growth & Income funds ($5.9 billion) and Gold ETFs ($5.2 billion).

Monthly net investment to Bond funds totaled $14.9 billion. Taxable Bond funds netted $9.5 billion, driven by $12.8 billion of net inflows to index funds. Top-inflow objectives in February included Corporate Intermediate Maturity ($6.5 billion), Corporate High Yield ($4.8 billion), and Corporate Bond General ($4.6 billion). Tax-Free products continued to steadily attract new investment totaling $5.4 billion.

Money Market mutual fund net deposits totaled $38.8 billion in February.

More information about Strategic Insight is at www.sionline.com.
The Markets March 15, 2016

DC Plan Participant Trading Activity High in January

Even though trading was lighter in February, in both months DC plan participants favored fixed income investments.
Reported by

As stocks tumbled in January, defined contribution (DC) plan participants were busy making trades, according to the Aon Hewitt 401(k) Index.

January had six days of above-normal trading activity and saw 0.39% of balances traded in the month—well above December’s value of 0.14% and the highest level since January 2013. Participants heavily favored fixed income over equities when they made trades with 82 cents of every dollar traded going from an equity instrument to a fixed income fund. Additionally, 14 out of 19 (74%) of the trading days showed more inflows to fixed income.

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GIC/stable value funds, Bond funds, and Money Market funds saw the most inflows at $348 million, $172 million and $106 million, respectively. The most trading outflows were in target-date funds ($251 million), Large U.S. Equity funds ($145 million) and Small U.S. Equity funds ($58 million).

After reflecting contributions, trades, and market activity in participants’ accounts, the percentage in equities decreased to 64.1% at the end of January, down from 65.4% at the end of December. Despite the movement of current balances to more conservative investments, participants were still keen on investing new money in stocks, as contributions to equities increased to 66.3% from 63.7% in December.

NEXT: February a lighter trading month

February was a slow trading month for 401(k) plan participants with a daily trading average of 0.024% of balances—down from 0.034% in January. There was one day of above-normal trading activity.

However, when participants traded, most inflows were into fixed-income funds, just as in January.

In February, Bond funds took in $191 million of DC participants’ assets, while GIC/stable value funds and Money Market funds saw inflows of $91 million and $29 million, respectively. Target-date funds lost $97 million in participants’ assets, while company stock funds and Large U.S. Equity funds posted outflows of $85 million and $66 million, respectively.

After combining contributions, trades, and market activity in participants’ accounts, the percentage in equities was 64.0% at the end of February, down slightly from 64.1% at the end of January. New contributions still favor stocks, but the contributions to equities decreased slightly from 66.3% in January to 65.9% at the end of February.

More information can be found here.

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