Last updated: 05:02 / Wednesday, 15 October 2014
Morningstar Reports Flows

Active and Passive U.S. Equity Fund Flows Continued to Move in Opposite Directions in October

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Active and Passive U.S. Equity Fund Flows Continued to Move in Opposite Directions in October
  • Active taxable-bond funds registered their most significant monthly outflow since June 2013 after the announcement of Bill Gross' departure from PIMCO
  • Morningstar downgraded 4 PIMCO funds but reafirmed 5
  • Long-term mutual funds and ETFs attract $9.0 billion of new investor cash in September

Morningstar has reported estimated U.S. mutual fund and exchange-traded fund (ETF) asset flows for September 2014. Long-term mutual funds and ETFs attracted $9.0 billion of new investor cash during the month.

Active taxable-bond funds registered their most significant monthly outflow since June 2013, $18.7 billion, spurred by the Sept. 26, 2014 announcement of Bill Gross' departure from PIMCO. Outflows from PIMCO Total Return aside, taxable-bond funds have otherwise seen relatively consistent inflows year to date.

Active and passive U.S. equity fund flows continued to move in opposite directions—active U.S. equity funds saw outflows for the seventh consecutive month, and passive U.S. equity funds collected inflows for the eighth consecutive month.

Among passive funds, all categories except commodities funds saw inflows in September, most notably U.S. and international-equity offerings. Total passive flows were larger than total active flows for the seventh straight month.

The three active funds with the heaviest outflows during the month were PIMCO funds formerly managed by Bill Gross, which lost a little more than $23.3 billion. Two intermediate-term bond funds that appeared to be reaping the benefits of investors seeking alternatives to PIMCO include Metropolitan West Total Return Bond, which has a Morningstar Analyst Rating™ of Gold, and unrated Fidelity® Series Investment Grade Bond. On the passive side, Vanguard Total Bond Market Index also collected large sums of fixed-income-oriented money.

Changes for several U.S. funds

Morningstar has also announced Morningstar Analyst Rating changes for several U.S. funds. In the six weeks since the end of August, Morningstar analysts upgraded one U.S. fund rating and downgraded three fund ratings, including PIMCO Total Return. On Sept. 26, Morningstar placed all 39 analyst-rated PIMCO funds Under Review following the departure from the firm of Bill Gross, founder, managing director, and chief investment officer. As of Oct. 10, Morningstar analysts had reaffirmed, upgraded, or downgraded Analyst Ratings for 10 PIMCO funds. Morningstar will continue to review Analyst Ratings for PIMCO funds as part of an ongoing assessment of Gross' departure based on the Morningstar Analyst Rating methodology.

Morningstar reaffirmed Analyst Ratings for the following PIMCO funds as of Oct. 10:

  • PIMCO All Asset, reaffirmed Analyst Rating of Gold
  • PIMCO All Asset All Authority, reaffirmed Analyst Rating of Silver
  • PIMCO EqS® Long/Short, reaffirmed Analyst Rating of Neutral
  • PIMCO Income A, reaffirmed Analyst Rating of Silver
  • PIMCO Municipal Income II, reaffirmed Analyst Rating of Neutral

Morningstar upgraded the following PIMCO fund as of Oct. 10:

  • PIMCO Municipal Bond, upgraded to Bronze from Neutral

Morningstar downgraded the following PIMCO funds as of Oct. 10:

  • PIMCO Corporate & Income Opportunities, downgraded to Neutral from Bronze
  • PIMCO Emerging Local Bond, downgraded to Silver from Gold
  • PIMCO Emerging Markets Bond A, downgraded to Silver from Gold
  • PIMCO Total Return, downgraded to Bronze from Gold

As of Sept. 30, 2014, 138 U.S. funds had a Morningstar Analyst Rating of Gold, 285 funds had a Silver rating, 325 funds were rated Bronze, 330 funds had a Neutral rating, and 40 funds were rated Negative. Approximately 10 percent of mutual funds available for sale in the United States are currently Morningstar Medalists. Morningstar's manager research team covers about $8 trillion of U.S. investor assets, which is equivalent to approximately 70 percent of total investor assets in the United States.

Aside from Analyst Rating changes for PIMCO funds, Morningstar changed Analyst Ratings for the following U.S. mutual funds in September:

  • Franklin Flex Cap Growth, downgraded to Neutral from Bronze
  • Invesco International Growth, upgraded to Silver from Bronze
  • TFS Market Neutral, downgraded to Silver from Gold
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