Investors pulled $46bn from the mutual funds and exchange-traded funds focused on US stocks in October, the second-highest monthly outflows ever after August, according to a Morningstar report this week [week commencing 9 November].
While actively managed and passive strategies each “felt the sting of outflows in October”, the research firm said “outflows are hitting active managers much harder”.
Investors withdrew about three times as much capital from actively managed US equity funds, leaving passive strategies with about $300bn more in assets for a total of $4.8tn in the category at the end of October, the report shows. Passive funds have been winning over investors as active managers charge higher fees despite failing to persistently outperform.
The coronavirus pandemic and US elections have injected volatility into the markets this year, with October marking the seventh straight month of outflows for US equities. Even large-growth equity funds, which Morningstar called “one of the market’s hottest areas in 2020”, bled $19bn last month.
“Many firms that prefer value to growth investing have struggled to retain assets,” Morningstar said. “Dimensional Fund Advisors’ $3.6bn of outflows in October marked the eighth consecutive month of at least $2.6bn in net redemptions.”
The outflows pushed Dimensional out of the top 10 largest firms measured by total long-term assets under management, according to Morningstar.
Vanguard Group is the biggest asset manager, with its $5.4tn under management representing about a quarter of the market share, the report showed. Fidelity Investments is the second biggest at $1.9tn of assets, and American Funds ranks third with about $1.8tn.
Morningstar highlighted other US fund managers with big outflows from equities. Invesco, the asset manager in which Nelson Peltz’s Trian Fund Management has built a stake, saw $4bn of outflows from its US equity funds in October, the research firm said. And Dodge & Cox, “whose equity strategies tilt toward out-of-favour areas such as energy and financials”, had almost $1.7bn of withdrawals last month.
This article was originally published by Institutional Investor on 13 November 2020.
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