Investors Continue to Flee Active U.S. Equity Funds

Instead of soaking up the sun, it seems investors were busy taking money out of active U.S. equity funds in July. This month’s $32.9 billion estimated outflow surpassed the $21.7 billion from June, adding up to a total of $54.6 billion leaving these funds in only two months.

All active category groups except taxable bond, municipal bond, and commodities suffered outflows; flows for all category groups on the passive side were positive. Interestingly, the passive U.S.-equity inflow in July was the largest in a while at $33.8 billion, managing to offset the large active outflow.

In terms of total flows (active and passive combined), the taxable-bond category group remained the undisputed leader with $34.0 billion, followed by municipal bond and commodities. Allocation, international equity, and sector equity ended up in negative territory for the month. Interestingly, in terms of one-year flows, allocation actually suffered larger redemptions than U.S. equity.

Other notable asset-flow trends include:

• Most major global indexes have rebounded after Brexit, with the MSCI EAFE posting a 5.1% return in July. Outflows from international equity, however, have worsened.

• The top Morningstar Category remained unchanged from last month: intermediate bond. Investors' preference for intermediate-bond funds is easy to understand, because short-term bonds don't yield enough and long-term ones have higher interest-rate risk.

• Investors continued taking money out of the large-growth, Europe-stock, and world-allocation categories.

Access the full Morningstar U.S. Asset Flows Update here.