Investors Cut Risk in October

Kevin McDevitt, CFA
  • October's $29.1 billion in long-term outflows were the greatest since August 2015, which saw $30.3 billion of outflows. These outflows represented 0.15% and 0.22% of long-term assets, respectively. So, while the dollar flows are large, their impact on overall assets is relatively small. The $102 billion that exited long-term funds at the height of the global financial crisis in October 2008 represented 1.4% of assets, or nine times as much as October 2018's outflow, percentage-wise.

  • In contrast with recent history, fixed-income funds were hit much harder than equity. A combined $19.2 billion left taxable and municipal bond funds, while just $2.2 billion fled equity funds. 

  • Taxable bond funds had their worst month since December 2015 with $14.2 billion in outflows, perhaps due in part to September's Fed rate hike. Ultrashort bond funds likely benefited from this hike, though, and collected a record $11.3 billion in inflows. Meanwhile, high-yield bond funds were hit with $7.3 billion in outflows. Municipal bond funds also had their worst month since December 2016. 

  • The allocation-fund rout continues with another $9.0 billion in outflows, the worst month since December 2015. 

  • Active funds had their worst month since December 2016 with $46.0 billion in outflows. Similarly, passive inflows were modest, especially if the sector and leveraged groups are included. Across all four groups, passive collected $16.9 billion.