Record $33 Billion Pulled From Active U.S. Stock Funds in JulyBy
Vanguard and State Street passive funds reaped most inflows
About 43% of equities, 28% of taxable bonds are passively held
Investors pulled $32.9 billion last month from actively managed U.S. mutual funds that buy domestic stocks in July, the biggest monthly outflow in data going back to 1993, as money continues to move into low-cost passively managed funds, according to Morningstar Inc.
About an equal amount, $33.8 billion, went into passive funds that invest in U.S. equities, Chicago-based researcher Alina Lamy of Morningstar said Friday in an interview.
“It’s almost perfectly balanced,” Lamy said.
U.S.-based active funds that buy domestic equities had redemptions of $211 billion in the 12 months through July while investors poured $163.6 billion into passively managed funds during the period as active managers failed to generate returns above indexes that justify their higher fees. Almost $401 billion has flowed into passively managed mutual funds and exchange traded-funds over the past year as $327.8 billion was withdrawn from actively-managed funds.
Passively-managed funds now oversee about 43 percent of U.S. equity funds and 28 percent of U.S. taxable bonds, according to Morningstar.
The SPDR S&P 500 ETF had $11.1 billion in net inflows, more than any active or passive fund in July. It’s uncertain how much of that influx came from retail investors and how much is being parked there temporarily by institutional investors, Lamy said.
The only actively-managed categories with positive net flows in July were $13.5 billion to taxable bond, $6.3 billion to municipal bond and $445 million to commodity funds, according to the report.
Vanguard Group Inc. had total net inflows of more than $23.1 billion in July, followed among fund families by $11 billion to SPDR State Street Global Advisors, according to Morningstar. Investors pulled $3.77 billion from Franklin Templeton Investment’s funds and $3.6 billion from Fidelity Investments during the month.