Investors Still Hungry for International Equity Funds

After a one-off month in which taxable-bond funds received the highest flows, international equity was once again the highest-receiving Morningstar Category group in November, with a $4.9 billion total inflow for the month. Sector equity followed with $4.2 billion.

The strong inflows for international equity occurred despite the weak performance of foreign stocks in November, driven mainly by disappointing third-quarter GDP growth in Europe.

The U.S. stock market, on the other hand, was mostly up as many economic indicators continued to show strength: increasing consumer confidence, a solid employment report, and improvement in most housing data. Despite the encouraging outlook, investors withdrew $19.7 billion from active U.S.-equity funds in November. The positive $13.0 billion flow on the passive side was not large enough to offset the active outflow, resulting in an overall $6.7 billion outflow for the category.

Other noteworthy trends for the month include:

• In November, actively managed U.S. equity funds saw their sixth-worst monthly outflow since 1993 when Morningstar's fund flow data begins. However, a small subcategory has been growing in popularity recently and has managed to attract positive flows on a 12-month rolling basis since October 2013: socially responsible funds.
• The high-yield bond category has been highly volatile in terms of flows over the past few months, jumping from the bottom five list in September to the leading five in October, and now back again to the bottom-flowing list in November.
• We have started and will very likely continue to see more volatility in flows of funds concentrated in downtrodden MLPs.

Access the November fund flows report in its entirety here.