Morningstar says investors are turning away from U.S.-equity mutual funds and ETFs — taking some $14.3 billion out of these products in July. That is a nearly 80% jump from June outflows of $8 billion. Plus, outflows from U.S. equity funds for the first seven months of 2015 exceeded any previous annual outflows since 1993, the fund research firms says.
The losses have mainly been on the active side, with active funds seeing outflows of $20.5 billion in July and nearly $159 billion for the past 12 months, according to Morningstar estimates. Meanwhile, passive U.S. equity funds gained assets of $6.2 billion in July and $140.8 billion since July 2014.
International equities are seeing strong investor activity, enjoying inflows of about $217.7 billion in the past 12 months — near the peak level of $201.6 billion seen in 2013. Foreign large-blend funds, for example, had inflows of $21.3 billion, collected greater inflows than the next four top-asset-gathering categories combined in July.
"The S&P 500 has only delivered a mediocre 3.4% return this year. The MSCI EAFE Index, on the other hand, has returned 7.7%. As flows tend to follow performance, money redeemed from U.S. equity has been making its way to international equity…," Morningstar senior analyst Alina Lamy explained in a report released in mid-August.
"Apart from flows following performance, this pattern also hints at investors' expectations for the future. The consensus is that the United States is in the late stages of its bull market," stated Lamy. "Globally, countries are cheaper on a fundamental level, and Europe and Japan are still actively stimulating their economies. Investors are aware that the United States and Europe are at different points in the economic cycle, and this is reflected in the flows."
Fund Families
Different fund groups are being impacted by these trends, of course. Vanguard, for instance, saw its passive fund flows top $16 billion in July, while its active funds had outflows of $1.3 billion. For the past year, its inflows have been over $259 billion.
