MutualFundWire.com: Will $13B in ETF Outflows Help Mutual Funds?

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Monday, July 1, 2013

Will $13B in ETF Outflows Help Mutual Funds?

The ETF bond market bled $13 billion in June, bringing U.S. listed ETFs down around 5 percent to $1.4 trillion, IndexUniverse's Olly Ludwig reports. The volatility following the Ben Bernanke's announcement hit international equities especially hard. Redemptions in those ETFs totaled nearly $9 billion. U.S. bond funds didn't do much better, however, with $7 billion in outflows recorded for the month.

The ETF volatility begs the question: How long will investors flock to mutual funds in the aftermath of the Fed announcement?

“I think this may not be the only outflows month in 2013, but the merits of an ETF vs. mutual fund are still there,” said Todd Rosenbluth, an analyst at S&P Capital IQ in New York, who focuses closely on ETFs.

Rosenbluth said it seems plausible that when investors return to the markets once the redemption wave recedes, they’ll get back in using ETFs—equities or bond ETFs—instead of mutual funds, because ETFs are cheaper and many mutual funds aren’t beating, let alone matching, the performance of their benchmarks.