Vanguard Bucks the Trend on Outflows in November

Investors slowed their redemptions but still took out a net $41 billion in November following a gargantuan $111 billion in October redemptions, according to flow estimates from Morningstar Market Intelligence. (The figures exclude ETFs, money markets, and funds of funds.)

Net outflows declined in all six of Morningstar's broad asset classes. Taxable-bond funds suffered the greatest outflows, with $13 billion coming out following $33 billion in October.

Although most asset classes lost money in November, they did so at much more moderate rates, thus leading to the more moderate redemptions. Even so, $41 billion is a huge number for an industry accustomed to a few billion in positive net flows in a typical month. International stock funds suffered $10 billion in net redemptions following a $20 billion outflow. U.S. equity funds shed $8 billion versus $34 billion. Balanced funds had net outflows of $7 billion versus $16 billion. Muni-bond funds shed $2 billion versus $9 billion. Alternative outflows fell to about $600 million from $1.6 billion.

Morningstar Market Intelligence 10-01-08 to 11-30-08
U.S. Broad Asset Class	Estimated Net Flow 10-08	Estimated Net Flow 11-08
Alternative	(1,657,949,978)	(619,799,449)
Balanced	(16,303,453,374)	(6,935,058,905)
International Stock	(19,538,068,939)	(10,460,352,219)
Municipal Bond	(8,600,792,841)	(1,745,860,161)
Taxable Bond	(31,601,553,121)	(13,880,590,624)
U.S. Stock	(33,568,671,416)	(7,833,867,691)
Total Net Flows	(111,270,489,669)	(41,475,529,049)
U.S. open-end funds, excluding funds-of-funds and excluding money market funds.

Vanguard Leads the Way for Fund Companies
Vanguard was one of the few big fund companies to move back into the black with net inflows of $2.1 billion, compared with net outflows of $5 billion in October. The firm's Treasury funds likely helped as they remained strong amid a flight to quality. Others enjoying nice modest inflows were John Hancock, Eaton Vance, FPA, and TIAA-CREF.

Among the giant shops, Fidelity shed $3 billion, but that's a big improvement from the $18 billion in net outflows from October.  Fidelity Magellan (FMAGX) fell to 1 star for the first time in its history for the period ended November. Franklin Templeton and PIMCO each shed more than $2 billion.

However, giant American had the greatest net outflows to the tune of $7 billion, compared with net outflows of $16 billion in October. American's equity funds have generally performed respectably, but its bond funds' bias toward credit risk has stung.  American Funds Bond Fund of America (ABNDX) is down 15% this year--that's worse than 80% of its peers.  American Funds Tax-Exempt Fund CA  (TAFTX) is down 13%, which is worse than 90% of its peers.

Other firms suffering more than $1 billion in redemptions were Western Asset, Dodge & Cox, Oppenheimer, Columbia, and Morgan Stanley. Interestingly,  Fairholme (FAIRX), which took in $129 million in October, swung to net outflows of $7 million as the fund endured a brutal November. However, it's off to a good start in December, so it may swing back to the black in December.

Large-Blend Brings in the Most Cash
Looking at categories, large-blend drew the most, with net inflows of $3.1 billion, compared with outflows of $2.7 billion. Intermediate and short-term government both enjoyed positive flows of less than $1 billion. Muni national short and real estate also swung from modest net outflows to modest net inflows.

Bringing up the rear was intermediate-term bond, where a flight to quality meant that nearly every fund in the category fell much more sharply than the Barclays Aggregate Bond Index. The category shed more than $7 billion following a drop of $16 billion in October. Large-growth and world-stock shed about $4 billion, followed by moderate- and world-allocation, which shed about $3 billion. A couple of categories actually saw slight increases in their net redemptions: ultrashort bond and foreign small/mid-value.

Also noteworthy is that long-short and bear market, which might be expected to benefit from the sell-off, both suffered modest net outflows.

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