Morningstar Direct SM U.S. Open-End Asset Flows Update

Transcription

1 October 2013 Data through Sept. 30 U.S. Open-End Funds Also inside: Extended tables... 5 Morningstar Direct SM U.S. Open-End Asset Flows Update Investors Continue to Rotate to Shorter-Duration Bond Funds by Michael Rawson, CFA Long-term mutual funds received a tepid $2.5 billion inflow in September as municipal-bond funds remained in net redemptions for the seventh straight month. Taxable-bond funds saw their fourth straight month of outflows, although the pace of selling slowed relative to June's record outflow. U.S. equity funds saw their largest monthly outflow for the year to date, but the $3.3 billion outflow was small compared with the $9.1 billion average monthly outflow in International-equity flows were a bright spot. For the year to date, international-equity mutual funds have brought in $103 billion. While alternative mutual funds had the fastest growth relative to assets, the growth is largely driven by just one fund. For the quarter, money market funds brought in $92.3 billion compared with $11.1 for long-term mutual funds and $53.2 billion for exchange-traded funds. Estimated Net Flows $Mil* September 2013 QTD 1 Year Assets $Bil Organic Growth Rate % US Equity (3,263) 5,574 (16,847) 4,161 (0.08) Sector Equity 1,361 5,276 16, International Equity 7,282 23,755 99,208 1, Allocation 3,206 12,386 36, Taxable Bond (2,917) (19,892) 108,458 2,487 (0.12) Municipal Bond (6,543) (28,685) (31,619) 521 (1.26) Alternative 3,208 11,715 34, Commodities , All Long Term 2,480 11, ,602 10, Money Market 43,327 92, ,239 2, *Includes liquidated and merged funds. Source: Morningstar Direct Asset Flows Note: The figures in this report were compiled on Oct. 9, 2013, and reflect only the funds that had reported net assets by that date. The figures in both the commentary and the extended tables are survivorship-bias free. Calamos and Schwab/Laudus are not included. Important methodology note: Morningstar computes flows using the approach that is standard in the industry: Estimated net flow is the change in assets not explained by the performance of the fund. Our method assumes that flows occur uniformly over the course of the month. Adjustments for mergers are performed automatically. When liquidated funds are included, the final assets of the fund are counted as outflows. Reinvested dividends are not counted as inflows. We use fund-level reinvestment rates to improve accuracy in this respect. We make ad hoc adjustments for unusual corporate actions such as reverse share splits, and we overwrite our estimates with actual flows if managers are willing to provide the data to us. Please click here for a full explanation of our methodology Morningstar, Inc. All rights reserved.

2 Investors pulled $12.2 billion from intermediate-term bond funds. The 10-year Treasury rate marched higher throughout most of the third quarter before falling slightly following the Fed's surprise decision to delay the removal of stimulus, ending September at 2.62%. That is up from 2.48% at the end of the June, a month in which rates spiked and investors pulled a record $24.4 billion from the intermediate-term bond category. Gold-rated PIMCO Total Return PTTRX suffered its fifth month of significant outflows, shedding $5.4 billion. For the year to date, $28.1 billion has left the fund through outflows, a stark contrast to 2012, when it brought in $18 billion. The fund made up ground last month, returning 1.77%, which brings its year-to-date return to negative 1.89%, even with the Barclays Aggregate Bond Index. Assets in the fund have fallen to $250 billion from $293 billion at the end of April. Even strong relative returns have not been enough to stem outflows for funds in the category. Neutral-rated DoubleLine Total Return DBLTX has eked out a 0.29% gain for the year to date through month-end, enough to put the fund in the top fifth percentile of the category. Yet the fund received its sharpest outflows ever last month: $2.1 billion left the fund and assets have fallen to $35.1 billion from $40.7 billion at the end of April. Estimated Flows by Morningstar Category Estimated Net Flow $Mil September 2013 QTD 1 Year Assets $Bil Leading Bank Loan 5,353 21,116 57, Nontraditional Bond 4,620 16,579 50, High Yield Bond 3,136 4,625 (7,657) 253 Short-Term Bond 2,755 6,145 28, Foreign Large Blend 2,395 11,064 39, Lagging Intermediate-Term Bond (12,213) (45,325) (34,799) 977 Large Growth (3,087) (7,881) (36,942) 1,049 Intermediate Government (2,871) (11,964) (28,302) 104 Muni National Interm (1,939) (7,498) (4,644) 120 Inflation-Protected Bond (1,926) (6,781) (15,682) 93 Source: Morningstar Direct Asset Flows While investors have shunned the intermediate-term bond category, they have embraced bank-loan and nontraditional bond funds. Both categories are viewed as having some defensive characteristics should rates rise. The bank-loan category has an average return of 3.77% for the year to date, while the nontraditional bond fund category has lost 0.62%. It remains to be seen whether these funds will continue to deliver. Bronze-rated Oppenheimer Senior Floating Rate Fund OOSIX led all bank-loan funds, bringing in $1.3 billion last month. It is the largest fund in the category. Loomis Sayles Senior Floating Rate and Fixed Income LSFAX brought in $131 million and has quickly grown to $1.3 billion since its launch two years ago. In the nontraditional bond category, Neutral-rated Goldman Sachs Strategic Income Fund GSZIX brought in $1.9 billion, while Scout Unconstrained Bond Fund SUBFX brought in $247 million. Bronze-rated PIMCO Unconstrained Bond Fund PFIUX, which has led the category in flows for the year to date, had a $385 million outflow. For the year to date, the institutional share class of the fund has lost 1.46%. Investors returned to high-yield bond funds last month, as $3.1 billion went into the category, erasing last month's outflow. Bronze-rated BlackRock High Yield Bond Portfolio BHYIX received $567 million, yet the second-largest fund in the category, Bronze-rated PIMCO High Yield PHIYX, had an outflow of $587 million Morningstar, Inc. All rights reserved.

3 Since March, municipal-bond funds have lost $48 billion to outflows. That surpasses the $44 billion outflow in the period from November 2010 through August For the year to date, the municipal national intermediate category has had a return of negative 2.55%. The largest municipal bond fund, Silver-rated Vanguard Intermediate-Term Tax- Exempt VWITX saw a $525 million outflow in September, while JPMorgan Intermediate Tax Free Bond Fund JITIX lost $449 million to outflows. Equity Investors Look Overseas Despite posting better returns since rates began to rise in May, large-growth funds have suffered heavier outflows than large-value funds. Silver-rated Fidelity Contrafund FCNTX had outflows of $608 million, Bronze-rated T. Rowe Price Growth Stock Fund PRGFX had outflows of $434 million, and Neutral-rated Invesco American Franchise VAFAX had outflows of $177 million. Delaware U.S. Growth DEUIX bucked the trend with a $462 million inflow. While flows to U.S. equity funds remain lackluster, international-equity funds are receiving strong flows, leading all category groups for the month and year to date. The foreign large-blend, world-stock and diversified emerging-markets categories each have had strong flows, although flows to diversified emerging markets are off of their rapid pace from earlier in the year. Gold-rated Oakmark International OAKIX led all international-equity funds with a $1.4 billion inflow for the month. The fund closed to new investors on Oct. 4. The decision to close the fund comes after the fund has grown to $24.2 billion in assets from $9.5 billion a year ago. The fund's 40.79% return over the past year places it in the top 1 percentile of the category. Flows to international funds have been fairly balanced between active and passive. Combing mutual fund and ETF flows, actively managed funds have had inflows of $76.4 billion compared with $62.0 for passive. Within the U.S. equity category, active has seen outflows of $16.5 billion compared with $100.1 billion of inflows for passive. Within the alternative category group, Bronze-rated MainStay Marketfield MFLDX brought in $1.7 billion for the month and $10.2 billion for the year to date. The long-short equity fund has returned 13.17% annualized over the past three years through month-end, compared with 16.27% for the S&P 500, but it has accomplished this with less volatility, boosting its Sharpe ratio to 1.96 compared with 1.28 for the S&P 500 and placing the fund in the top 10% of the category. Assets are up nearly fivefold from just a year ago. Top- and Bottom-Flowing Funds in September Excludes money markets and funds of funds. Estimated Net Flow $Mil Assets $Bil Top-Flowing Funds Sept QTD 1 Year Sept Vanguard Institutional Index 3,629 3,431 7, ,919 Goldman Sachs Strategic Income 1,930 4,176 7,329 9,647 MainStay Marketfield 1,715 4,505 11,525 15,654 JPMorgan Strategic Income Opps 1,581 4,154 8,122 21,845 Vanguard Total Bond Market II Index 1,525 3,932 6,602 66,748 Bottom-Flowing Funds PIMCO Total Return (5,428) (20,626) (22,185) 250,051 Vanguard Five Hundred Index (3,140) (2,881) (3,115) 131,694 DoubleLine Total Return Bond (2,131) (3,841) 1,647 35,059 Old Westbury Global Opportunities (1,103) (1,065) (1,809) 5,823 Vanguard GNMA (1,028) (4,936) (9,895) 29,160 Source: Morningstar Direct Asset Flows Morningstar, Inc. All rights reserved.

4 Selling at PIMCO Has Become Broad-Based At the provider level, Vanguard raked in the most flows last month, followed by Goldman Sachs and Dimensional Fund Advisors. Heavy outflows beset PIMCO, Janus, and American Century. Up until June, PIMCO had been able to offset outflows from the firm's flagship PIMCO Total Return fund with inflows into other funds. Year to date, PIMCO Total Return has shed $28.1 billion, yet the firm overall has only shed only $3.5 billion, including ETFs, but excluding money market funds and funds of funds. Since June, PIMCO Total Return lost $30.2 billion to outflows, but the firm overall lost $38.2 billion. The other funds that had been picking up the slack but have had weaker flows more recently include Bronze-rated PIMCO Unconstrained Bond Fund, Silver-rated PIMCO Income Fund PIMIX, and PIMCO Stocksplus AR Short Strategy Fund PSTIX. Outflows have increased at Gold-rated PIMCO Real Return Fund PRRIX and Silver-rated PIMCO Investment Grade Corporate Bond Fund PIGIX. Neutral-rated PIMCO Floating Income Fund PFIIX and Bronze-rated PIMCO High Yield both saw large outflows last month despite being in popular categories. Two PIMCO funds of funds that had seen strong inflows of the past few years have faced outflows in recent months. Gold-rated PIMCO All Asset Fund PAAIX and Silver-rated PIMCO All Asset All Authority Fund PAUIX shed $338 million and $719 million, respectively. Top-10 U.S. Open-End Fund Families Ranked by assets, excluding money markets and funds of funds. Estimated Net Flow $Mil Assets Fund Family September QTD 1 Year September $Bil Market Share Vanguard 3,247 6,454 64,367 1, Fidelity Investments (1,549) (2,281) 3,165 1, American Funds (2,164) (5,703) (30,862) 1, PIMCO (6,451) (24,850) 11, T. Rowe Price (1,107) (2,342) 3, Franklin Templeton Investment Funds (360) (2,499) 8, JPMorgan 962 6,269 22, Dimensional Fund Advisors 1,650 5,552 18, OppenheimerFunds 1,094 3,850 16, BlackRock 1,177 3,154 6, Source: Morningstar Direct Asset Flows Morningstar, Inc. All rights reserved.

5 Morningstar Direct SM Publishing Date: Page 1 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1-Mo YTD 1 Large Blend 598 4,362 16,271 6,450 1, , Large Growth (3,087) (7,881) (20,090) (36,942) 1, Intermediate-Term Bond (12,213) (45,325) (61,652) (34,799) , (1.70) 4 Large Value (658) 2,573 6,358 5, Foreign Large Blend 2,395 11,064 42,015 39, Moderate Allocation 915 5,145 10,315 5, World Stock 1,851 2,581 14,272 9, World Allocation 292 3,441 12,577 12, Diversified Emerging Mkts 1,112 5,068 31,320 35, (2.95) 10 Short-Term Bond 2,755 6,145 20,570 28, Mid-Cap Growth (525) (1,785) (2,975) (8,018) High Yield Bond 3,136 4,625 (4,435) (7,657) Mid-Cap Blend 377 2,748 8,964 6, Conservative Allocation 1,412 2,882 13,867 16, Small Blend 218 1,806 5,756 4, World Bond (1,479) (2,819) 21,720 25, (3.18) 17 Small Growth (75) 1,201 2,559 (694) Multisector Bond 285 (456) 7,940 15, Foreign Large Growth (36) 242 4,609 4, Bank Loan 5,353 21,116 51,510 57, Mid-Cap Value (197) 1,716 6,664 5, Foreign Large Value 899 2,332 5,410 4, Muni National Interm (1,939) (7,498) (7,878) (4,644) (2.55) 24 Nontraditional Bond 4,620 16,579 44,943 50, (0.62) 25 Intermediate Government (2,871) (11,964) (27,486) (28,302) (2.21) 26 Muni National Short (12) 550 1,928 2, (0.39) 27 Small Value ,806 1, Inflation-Protected Bond (1,926) (6,781) (16,494) (15,682) (6.28) 29 Muni National Long (1,690) (7,071) (10,465) (9,455) (4.70) 30 Real Estate (43) (701) 4,584 4, Emerging Markets Bond (1,404) (3,134) 1,845 6, (7.27) 32 Health 560 2,180 6,237 5, High Yield Muni (16) (4,241) (7,591) (6,711) (6.06) 34 Ultrashort Bond 1,739 5,094 9,410 12, Commodities Broad Basket ,533 3, (2.06) (8.17)

6 Morningstar Direct SM Publishing Date: Page 2 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1-Mo YTD 36 Long-Term Bond ,805 5, (3.64) 37 Long/Short Equity 2,370 6,518 14,390 16, Equity Energy 646 2,051 5,351 4, Short Government (1,205) (2,844) (5,505) (5,881) (0.87) 40 Muni California Long (586) (2,287) (3,327) (3,343) (4.11) 41 Global Real Estate ,158 3, Technology Foreign Small/Mid Growth ,490 2, Natural Res (198) (343) (983) (1,634) Muni New York Long (383) (1,749) (2,974) (2,992) (5.35) 46 Multialternative 514 3,621 7,284 8, Muni Single State Long (623) (2,244) (3,093) (2,808) (5.42) 48 Pacific/Asia ex-japan Stk (28) (67) 1,070 1, (1.13) 49 Market Neutral ,734 2, Foreign Small/Mid Value Utilities (75) (102) (184) (646) Aggressive Allocation Europe Stock 798 1,817 1,455 1, Foreign Small/Mid Blend ,495 1, Muni Single State Interm (266) (920) (1,325) (1,270) (3.05) 56 Convertibles (189) Equity Precious Metals (69) 305 (1,554) (2,094) (8.84) (40.63) 58 Muni Single State Short (311) (479) (441) (317) (1.37) 59 Muni California Intermediate (97) (298) (1.82) 60 Multicurrency (70) (749) (56) (248) (2.38) 61 Diversified Pacific/Asia (11) 29 1,648 1, Managed Futures 239 1,044 2,004 1, (0.38) (3.89) 63 Muni Pennsylvania (164) (612) (864) (876) (4.61) 64 Bear Market (128) 65 3,821 5, (7.34) (25.73) 65 Financial (101) Muni New Jersey (96) (420) (661) (652) (5.07) 67 Muni Massachusetts (102) (468) (747) (698) (5.05) 68 China Region (55) (12) (355) (486) Long Government (203) (601) (1,268) (681) (10.12) 70 Miscellaneous Region (100) (306) (1,162) (1,508)

7 Morningstar Direct SM Publishing Date: Page 3 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1-Mo YTD 71 Muni Ohio (122) (438) (568) (496) (4.01) 72 Muni Minnesota (79) (294) (299) (213) (3.43) 73 Communications 48 (12) 6 (71) Consumer Cyclical Latin America Stock (57) (256) (1,041) (1,403) (10.48) 76 Industrials Muni New York Intermediate (59) (216) (282) (379) (2.47) 78 Japan Stock 14 (367) (696) (781) Consumer Defensive (50) (120) (65) Target Date Target Date Trading-Leveraged Equity Target Date (175) (94) Target Date Target Date (140) (12) Target Date Retirement Income (5) (82) (196) (204) Target Date (4) (94) (88) Target Date (4) (38) (130) (121) India Equity (41) (87) (215) (259) (21.06) 91 Target Date (93) (3) Trading-Inverse Debt (54) (405) 55 (149) (2.10) Trading-Leveraged Debt (40) (13.27) 94 Miscellaneous Sector Target Date Trading-Miscellaneous (8) (11) (2) (8) (0.84) (3.13) 97 Trading-Inverse Commodities (2) (2) Trading-Inverse Equity (9.65) (12.61) 99 Commodities Precious Metals (4) (4.89) 100 Trading-Leveraged Commodities 0 0 (3) (8) Top 10 (6,039) (12,827) 71,957 71,409 6, , All 2,480 11, , ,602 10, ,

8 Morningstar Direct SM Publishing Date: Page 4 of 6 Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 1 Vanguard 3,247 6,454 54,002 64,367 1, , Fidelity Investments (1,549) (2,281) 5,685 3,165 1, American Funds (2,164) (5,703) (13,745) (30,862) 1, PIMCO (6,451) (24,850) (8,227) 11, T. Rowe Price (1,107) (2,342) 4,015 3, Franklin Templeton Investment Funds (360) (2,499) 7,473 8, JPMorgan 962 6,269 16,566 22, Dimensional Fund Advisors 1,650 5,552 16,750 18, OppenheimerFunds 1,094 3,850 13,887 16, BlackRock 1,177 3,154 6,827 6, Columbia (1,059) (3,774) (9,715) (13,923) MFS 622 3,519 15,500 18, Dodge & Cox (831) (349) (825) (3,709) Invesco 56 (18) 1,881 1, Lord Abbett ,753 8, Wells Fargo Advantage 30 (636) (1,232) (2,960) Janus (1,282) (4,843) (9,828) (12,095) John Hancock 908 2,383 8,958 9, Principal Funds 98 1,037 5,846 7, American Century Investments (1,414) (2,527) (3,775) (4,033) Hartford Mutual Funds (399) (1,387) (7,651) (9,996) Harbor (93) (811) 1,561 1, Eaton Vance 151 1,383 8,432 8, Goldman Sachs 2,040 4,200 9,710 10, Legg Mason 61 (122) (217) (9) MainStay 1,615 4,182 9,982 10, GMO (1,112) (1) 879 2, ING Retirement Funds (578) (1,453) (3,636) (4,588) First Eagle 426 1,144 4,875 5, Oakmark 1,376 4,620 9,614 9, TIAA-CREF Mutual Funds 265 1,463 4,947 8, Ivy Funds 671 1,672 4,543 4, Prudential Investments (112) (2) 3,353 5, Thornburg ,848 1, Putnam 633 1,623 2,103 1,

9 Morningstar Direct SM Publishing Date: Page 5 of 6 Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % 36 Dreyfus (833) (179) 1,170 1, Federated (248) (1,465) (3,583) (3,757) AllianceBernstein (139) (273) (466) (1,064) Nuveen (240) (1,459) (289) USAA (19) (137) 867 1, Natixis Funds ,011 1, DWS Investments (473) (1,083) (2,271) (2,392) Northern Funds ,681 2, DoubleLine (1,708) (3,485) (1,843) 2, Russell (98) (260) Delaware Investments 242 (561) (239) Neuberger Berman ,800 2, Pioneer Investments 206 (520) (476) (1,506) Managers Funds 312 1,735 4,088 3, SEI ,981 2, Top 10 (3,502) (12,395) 103, ,685 5, , Top 50 (2,880) (5,594) 171, ,302 8, , Other 5,360 16,966 57,398 50,685 1, , All 2,480 11, , ,988 10, , Asset Classes Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % US Equity (3,263) 5,574 26,313 (16,847) 4, , Sector Equity 1,361 5,276 19,621 16, International Equity 7,282 23, ,175 99,208 1, , Allocation 3,206 12,386 38,390 36, Taxable Bond (2,917) (19,892) 43, ,458 2, , Municipal Bond (6,543) (28,685) (38,542) (31,619) Alternative 3,208 11,715 31,605 34, Commodities ,544 3, All Long Term 2,480 11, , ,602 10, ,

10 Morningstar Direct SM Publishing Date: Page 6 of 6 Morningstar Ratings Name Estimated Net Flow ($mil) Total Net Assets ($bil) 1-Mo QTD YTD 1-Yr Mkt Sh % Mkt Sh % QQQQQ 10,628 26, , ,970 1, , QQQQ 1,085 3,525 72,713 81,570 4, , QQQ (10,076) (19,819) (17,901) (48,563) 3, , QQ (7,604) (22,910) (59,249) (85,573) Q (2,297) (6,751) (25,627) (34,276) Not Rated 10,745 30, , , Total 2,480 11, , ,602 10, ,