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By Christine Benz and Michael Rawson, CFA | 10-11-2012 12:00 PM

Out of Equities and Into the Fire?

Although investors may remain broadly skeptical of equity markets, asset flow data suggest they could be taking more risk than expected in other asset classes.

Christine Benz: Hi I'm Christine Benz for Morningstar.

Investors have been selling equity mutual funds recently, but they’ve been making an exception for dividend-focused funds.

Joining me to discuss the latest trends in mutual fund inflows and outflows is Mike Rawson; he is a fund analyst with Morningstar.

Mike, thank you so much for being here.

Mike Rawson: Thanks for having me, Christine.

Benz: Mike, you noted in a recent report that equity mutual funds have seen $83 billion in outflows so far in 2012, despite a very strong equity market. What happens when you add ETF flows back in? So $83 billion [has flowed] out of traditional mutual funds. Have equity [ETFs] actually gathered assets?

Rawson: Equity ETFs have gathered assets--about $37 billion. So, you mentioned that $83 billion have flowed out of equity mutual funds. ETF flows are about $37 billion, so it offsets some of that declined, but not all of it.

So with the ETF flows, it’s indicative of people maybe preferring some passive products in this environment, but still generally skeptical with the equities market overall.

Benz: And you're seeing that trend toward passive products even in the traditional mutual fund space, so it's not just ETFs, traditional index mutual funds too?

Rawson: Absolutely.

Benz: So, you noticed that one area that has actually been a pretty strong pocket within the equity universe is that group of dividend-focused funds. Let's talk about what have been some of the bigger asset gatherers within that space.

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