Passive US equity funds see growth as actives see outflows
Passive US equity funds took in $18.2 bn in inflows while active US equity funds suffered $11.4 bn in outflows in April, according to Morningstar’s latest report on flows.
Index giants BlackRock and Vanguard dominated mutual fund and exchange-traded fund (ETF) inflows in April, while traditional active powerhouses such as Fidelity and Franklin Templeton continued to lose money to their passive counterparts.
Among the top 10 US fund families by assets under management, BlackRock’s iShares business continued to dominate with about $17 bn in inflows in April, followed by Vanguard, with $12.3 bn in inflows.
Although Vanguard still leads the inflows for the year to date, the report notes that the firm’s growth so far in 2018 continues to slow year on year. It took in an estimated $141.5 bn for the first four months of 2017, compared with the $71 bn it has pulled in so far this year.
Another asset manager facing slowing or stagnant growth is State Street Global Advisors’ SPDR business, which has collected about $24 bn over the past 12 months versus the $168 bn pulled in by iShares.
Morningstar says that while SPDR’s market share of 3.34 percent is flat over the 12-month span, iShares’ market share has grown from 6.93 percent to 7.54 percent during the same period.
The report points to SPDR’s cost relative to that of iShares’ and other products as having an impact on investor demand. Coincidentally, State Street has announced that it will reduce expense ratios for two fixed-income ETFs and lower share prices for five equity ETFs.
On the active front, Fidelity Investments had overall outflows of about $5.6 bn, which were mostly on the active side. Its active funds lost about $11.3 bn in net redemptions while its passive funds had $5.7 bn in positive flows.
The mutual fund behemoth had five funds included in the bottom 10 Morningstar-tracked funds in terms of net flows: Fidelity Large Cap Stock Fund, Fidelity Select Technology Portfolio, Fidelity Value Discovery Fund, Fidelity Contrafund Fund and Fidelity Series Investment Grade Bond Fund.
Franklin Templeton also suffered another $2.8 bn of outflows in April, bringing the firm’s total outflows to $29 bn over the past 12 months. In particular, the Franklin Income Fund has seen nearly $6.2 bn in redemptions over the past 12 months, the report states.