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Friday, March 31, 2017

Is Beating the Index Still Enough?

News summary by MFWire's editors

Winning mutual funds still lost in the last year, at least as a whole. Yet there was one bright spot.

Jeffrey Ptak
Morningstar
Head of Global Manager Research
The much-talked-about active-passive shift continues, and performance may no longer be enough to spare active funds from outflows. Jeffrey Ptak, head of global manager research with Morningstar, digs into recent flow numbers and finds that, overall, "winning" active funds "that have beaten their benchmarks recently" still suffered $99 billion in net outflows in the 12 months ending January 31, 2017.

The flows picture is brighter when you look at the last three years (ended January 31, 2017), with the winning active funds bringing in $425 billion in net inflows. And over both the one- and three-year timeframes, losing funds (those that trailed their benchmarks) fared far worse, suffering $214 billion in net outflows in the last 12 months and $1 trillion in net outflows in the last 36.

Bond funds seem to have bucked the recent outflows trend, with both winning and losing bond funds bringing in overall net inflows in the last 12 months. And, Ptak notes, more than half of winning funds' $425 billion in net inflows in the last 36 months went into winning bond funds.

On the flip side, winning active U.S. equity funds suffered $93 billion of net outflows in the last 12 months. And over the last three years, as Ptak puts it, "funds that lagged were annihilated, while those that beat more or less subsisted." Ptak cautions that mutual fund investors might be "assuming that passive will continue to outperform."

"The recent rash of outflows from winning active funds bears monitoring for signs of continuation and even acceleration," Ptak writes. 

Edited by: Neil Anderson, Managing Editor


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