More active managers are beginning to generate alpha in an extended bull market environment but traditional open-end mutual funds are still bleeding assets. Meanwhile, investors continue to favor low-cost, easy-to-use exchange traded funds.
U.S. mutual funds experienced $4.5 billion in outflows over the past week, bringing the cumulative outflows to more than $150 billion year-to-date, compared to $162 billion in outflows for the same period last year, reports Robin Wigglesworth for the Financial Times.
Since November 2016, U.S. mutual funds tracked by EPFR have not seen a trace of inflows and their cumulative outflows over the past decade has now crossed the $900 billion marker. In contrast, U.S. ETFs have enjoyed $880 billion in inflows over the period.
“These are strong headwinds,” David Lafferty, chief market strategist at Natixis Global Asset Management, said. “While active managers have always competed against each other, they have never had to confront a threat of this magnitude.”
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Lafferty, though, argued that the relentless competition from cheap, passive investment vehicles, like ETFs, could ultimately be a positive for the asset management industry as the increased competitiveness would drive out underperforming fund managers and make the industry more “lean and mean.”
Investors have continued to pull assets from active managers, even as traditional stockpickers have exhibited improved performance in 2017. Around 55% of all U.S. equity fund managers have beaten benchmarks this year and are now on track for their best yearly performance since 2007.
There are now 2,092 U.S.-listed exchange traded products, or exchange traded notes and ETFs, with $3.279 trillion in assets under management, according to XTF data. The U.S.-listed ETF universe has attracted $391.4 billion in net inflows year-to-date.
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