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Friday, October 20, 2017

The Vanguard-BlackRock Show Continued In September

Reported by Neil Anderson, Managing Editor

With few notable exceptions, passive titans continued to dominate mutual fund net flows last month. Money funds and bond funds had a big month overall, and passive AUM surpassed active in one category and inched closer in another.

Chicago-based investment research specialist Morningstar recently released its "Morningstar Direct Asset Flows Commentary: United States" report for September 2017. As usual, Alina Lamy, senior analyst of quantitative research, penned the report. (An abridged version of the report is publicly accessible, while the full report with appendices is available to Morningstar Direct users.)

Vanguard crushed it yet again, bringing in an estimated $30.866 billion in net inflows in September, up from $20.668 billion a month earlier and a full $12 billion more than any other firm. BlackRock stayed in second with $18.456 billion, followed by: SSgA, $3.537 billion; Pimco, $3.254 billion; and Schwab, $2.26 billion.

Proportionately, Schwab was on top yet again among big fund firms, thanks to September net inflows equivalent to about 1.41 percent of its AUM, compared to about two percent in August. Other big September inflow winners on a relative basis were: BlackRock, 1.23 percent; Pimco, 0.96 percent; Goldman Sachs, 0.85 percent; and PGIM, 0.78 percent.

Yet half of big fund firms suffered net outflows in September. Leading the pack in outflows was Franklin Templeton, with estimated net outflows of $2.281 billion. Other big sufferers included: T. Rowe Price, $1.842 billion; Harbor, $1.247 billion; Invesco, $909 million; and Wells Fargo, $820 million.

Proportionately, among big fund firms Harbor again suffered the biggest net outflows, equivalent to about 1.78 percent of its AUM. Other big sufferers, proportionately, in September included: Wells Fargo, 0.89 percent; Franklin, 0.59 percent; Voya, 0.57 percent; and American Century, 0.43 percent.

Industrywide, long-term mutual funds that are actively managed suffered an estimate $5.576 billion in net outflows. Yet money market funds brought in $26.307 billion in net inflows, and passive funds brought in $56.433 billion.

Among long-term, active mutual funds, taxable bond funds brought in an estimated $14.447 billion in net inflows, while muni bond funds brought in $2.87 billion.

On the flip side, among long-term, active mutual funds, U.S. equity funds suffered $18.531 billion in estimated net outflows in September. $1.354 billion net flowed out of allocation funds, $1.179 billion out of international equity funds, $913 million out of sector equity funds, $566 million out of alternative funds, and $350 million out of commodity funds.

Of note is that passive sector equity funds now have more AUM than active sector equity funds, $476 billion versus $401 billion, per M* estimates. And in the biggest of all the categories, U.S. equity, passive is catching up to active; active U.S. equity funds now hold an estimated $3.919 trillion, while passive ones hold $3.525 trillion. Thanks to net flows to passive and out of active, last month that active-passive U.S. equity AUM gap shrunk by more than $31 billion; if that rate continues, it'll take 13 months for passive U.S. equity funds to surpass active U.S. equity funds in AUM. 

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