Nearly $350 billion has left U.S. equity mutual funds the past three years while the ETF industry has continued to grow. One reason for the disparity is that younger investors are embracing ETFs, which could drive further growth in the business.

Exchange traded funds “now offer investors a competing product to mutual funds, and flows into U.S equity ETFs over the last three years amounts to some $93.9 billion,” says Nicholas Colas, ConvergEx Group chief market strategist.

“The fact that ETFs are not widely used in defined contribution plans means that these flows may not be the destination of the money that has left mutual funds, however,” he wrote in a note. “In fact, we’ve spoken to ETF sponsors who posit that ETF investors represent a younger demographic than mutual fund holders and therefore the two pools of money have origins in different rivers of capital.”

Since August 2009, the S&P 500 is up 39.6%. However, investors in U.S. stock mutual funds have withdrawn $347.2 billion, according to Colas. “The outflows have been persistent to the point of monotonous,” he said.

The ETF business represents about $1.2 trillion, a small fraction of the assets held in mutual funds, although the industry continues to grow. [ETF Assets Hit Record]

In a report earlier this year, the ConvergEx strategist said changing demographics are fueling the growth of ETFs and continued outflows from stock mutual funds. [Are Shifting Demographics Driving ETF Growth?]

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