Passive mutual fund and ETF flows exceeded active flows in 2014 for all equity Morningstar Category Groups, as well as for taxable-bond funds.
Investors appeared to still favour active management for allocation, municipal bond, and alternative funds.
In terms of annual flows by category group, fixed-income funds received the vast majority of investor money from 2009 to 2012 amid the flight-to-safety trend that followed the financial crisis. Investors did not regain confidence in equities until 2013, when US and international-equity flows again surpassed fixed-income flows. Asset flows were fairly balanced in 2014; international-equity funds led the way, trailed closely by US equity funds.
Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETFs by computing the change in shares outstanding.
Additional highlights from Morningstar’s latest report about US asset flows:
• Active US equity funds saw outflows for the 10th consecutive month in December, while passive US equity funds collected inflows for the 11th straight month. Overall in 2014, active US equity funds shed USD98.4 billion, and passive US equity funds took in USD166.6 billion.
• On the fixed-income side, active taxable-bond funds remained in negative territory at year end. Investors withdrew an estimated USD23.0 billion from active taxable-bond funds in December after the category group saw a small inflow in November.
• Vanguard collected the greatest inflows among passive providers in 2014, and the firm was runner up in terms of one-year flows on the active side, too. JP Morgan was the active provider that attracted the most inflows over the trailing 12 months through its advisor-sold funds.
• Metropolitan West Total Return Bond and Dodge & Cox Income, which both have a Morningstar Analyst Rating of Gold, continued to dominate active fixed-income inflows. SPDR S&P 500 ETF recorded the largest inflow among passive funds for the second month in a row. Meanwhile, outflows from PIMCO Total Return amounted to USD78.0 billion in the space of only four months, and MainStay Marketfield landed among the top five active funds with the greatest redemptions for the third consecutive month.