Investors to U.S. stock funds: Drop dead

Despite January rally, just $20 million went to U.S. stock funds
FEB 16, 2017

The Standard & Poor's 500 roared to a 1.98% gain in January, and investors yawned. The first winning January since 2013 should have cheered investors: A winning January agurs an up year 80% of the time. Yet U.S. stock funds saw a net inflow of just $20 million in January, while taxable bond funds saw $18.9 billion in net new cash, according to Morningstar. For the past 12 months — a time in which the S&P 500 jumped 20.0%, including reinvested dividends — investors have yanked $147.3 billion from U.S. stock funds, while lavishing taxable bond funds with $146.9 billion of new money. Investors had slightly more love for international stock funds, which saw a net inflow of $5.6 billion in January. Muni bond funds had an inflow of $3.9 billion. All other categories — sector equity, allocation, alternative and commodity — saw net outflows. In a surprise to no one, Vanguard saw the largest inflow in January, raking in $31.8 billion. In the past 12 months, the fund company has seen an estimated net inflow of $196.8 billion. Other fund companies saw more modest inflows in January. The American Funds welcomed $1.5 billion in new money, and Dimensional Fund Advisors saw $3.6 billion roll in the door. Fidelity Investments, however, watched $5 billion head for the exits. A flood of money — $14.5 billion — streamed from actively managed funds in January, while $38 billion flowed into passively managed long-term funds. Who was doing all the selling? The non-proprietary distribution channel, which Morningstar defines as "Fund share classes sold primarily through active broker/dealers who have licensing agreements with the fund company." That channel saw $15.8 billion flee from all Morningstar categories. Institutional funds welcomed $16.3 billion in net new cash.

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