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Equity Fund Launches Are Surprisingly Common Despite Outflows

We saw some big trend reversals in 2012's fund launches.

Russel Kinnel, 01/22/2013

With 2012 in the books, this is a fine time to look at trends in fund launches. I pulled data on the 484 open-end mutual funds launched since the end of 2011 so I could see where the fund industry is headed.

Stocks Over Bonds?
Maybe the biggest surprise here is that we saw more stock funds launched than bond funds, considering that investors still piled into fixed income last year. Generally there are enough trend-chasing folks in the fund industry to assure that recent inflow trends will sync up nicely with fund launches, but not in 2012. (I'm using Morningstar's broad asset classes here.)

We had 96 U.S. equity funds launched and 89 foreign-stock funds launched while there were 84 taxable-bond fund launches and a mere nine new municipal-bond funds.

The launch crown, though, goes to the balanced-fund group, where 121 funds were launched. There have been positive flows there, though the number is boosted by the fact that when a firm launches a suite of 529 college-savings or target-date funds, you might see 10 funds come out at one time.

One place that did reflect positive flow trends was the alternatives categories where 64 funds were launched.

So Much for Other Trends?
We only had one China fund and one India fund launched. And there was only one fund with the word "unconstrained" in its name. What happened to those bandwagons?

Biggest Debuts
Excluding funds clearly meant just for target-date offerings, 401(k) plans, and institutions, you get an interesting mix when looking at which funds have gathered the most assets. Wells Fargo Advantage Absolute Return WARAX (which has more than $2 billion), Transamerica Dividend Focused TDFAX ($850 million), HSBC Total Return HTRAX ($400 million), and Transamerica Small Cap Value TSLAX ($370 million) all hit the ground running.

The HSBC fund shows that alts funds continue to be a big draw.

Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. (Click here for a free issue). Mr. Kinnel would like to hear from readers, but no financial-planning questions, please. Follow Russel on Twitter: @russkinnel.
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