Passive Fund Momentum Continued During September

Net new flows to long-term mutual funds and exchange-traded products (ETPs) totaled $14.1 billion in September, according to Strategic Insight, parent company of PLANADVISER.

Active and passive strategies continued to experience divergent trends in net investments. Passive funds led demand with $37.7 billion of inflows (including $27.5 billion to ETPs), while actively managed funds experienced aggregate net redemptions of $23.6 billion in September.

Taxable Bond funds saw the strongest demand among long-term funds, attracting $22.1 billion of net inflows. The space’s year-to-date flows of $168.4 billion represent a substantial increase over the $39.9 billion seen during the first nine months of 2015. Taxable Bond flows in September were fairly evenly split between active and passive strategies, as active funds experienced net investments of $9.4 billion and passive funds gathered net flows of $12.7 billion.

Active U.S. and International/Global Equity funds saw outflows of $36.9 billion in September, while index equity exposures attracted net inflows of $24.6 billion. Net outflows among active funds were driven by redemptions in large capitalization strategies. Global and Alternative strategies, including Global Total Return, Managed Futures, and Commodities Broad-Based, gathered positive net flows among active funds in September.

Net redemptions from Money Market funds in September totaled $21.1 billion. Taxable Money Market funds experienced comparatively flat inflows of $1.9 billion, while Tax-Free Funds saw $23.0 billion of net withdrawals. The approaching October deadline for money market funds to comply with new regulations caused an even greater bifurcation among Taxable Money Market funds, as government funds saw net deposits of $220 billion while prime money market funds experienced net redemptions of $245 billion.