Equity Funds Experience Outflows as Investors Cut Risk
Last month, U.S. open-end funds and ETFs experienced their greatest outflows since August 2015.
Investors cut risk in June 2018 as long-term U.S. open-end funds and ETFs had their greatest outflows since August 2015. While the bulk of outflows came from U.S. equity funds, which lost $20.8 billion to redemptions, they were hardly alone. Sector-equity, international-equity, allocation, alternative, and commodity funds all had net outflows; only taxable-bond and municipal-bond funds had inflows.
June capped the fourth-worst first half for U.S. equity flows over the past 10 years; only 2009, 2015, and 2016 were worse. The bulk of the net outflows were from large-cap funds, with $19.4 billion leaving large-blend funds alone. This was also the largest monthly outflow for large-blend funds in at least a decade.
In a bit of a paradox, the greatest net outflows came from active U.S. equity funds, which had $17.1 billion in net redemptions versus negative $3.7 billion for passive funds. But the greatest flows from individual funds came from index offerings: SPDR S&P 500 ETF (SPY), iShares Core S&P 500 ETF (IVV), Vanguard Institutional Index (VINIX), Invesco QQQ (QQQ), and Vanguard Total Stock Market Index (VTSMX). Those five funds combined for $14.7 billion in outflows.
This apparent contradiction can be explained by the fact that a few large passive funds had substantial outflows, but the majority (about 70%) had inflows. On the other hand, only about 26% of actively managed U.S. equity funds had inflows, and none of them were substantial. T. Rowe Price Small-Cap Value (PRSVX) led that group with about $660 million in estimated inflows.
Other items of note:
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Kevin McDevitt has a position in the following securities mentioned above: IVV, VINIX. Find out about Morningstar’s editorial policies.