Mutual Funds

A Break In Trend

Morningstar Reports U.S. mutual fund and exchange-traded fund flows for July 2021

Morningstar presents a snapshot of U.S. Funds activity for July 2021. Access the full report here. Additional commentary can be seen here.

CHICAGO, Aug. 18, 2021 /PRNewswire/ — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today reported estimated U.S. mutual fund and exchange-traded fund (ETF) flows for July 2021. Long-term mutual funds and ETFs gathered $72 billion in July, a modest intake relative to the average pace of $121 billion per month in the first half of 2021.

 

Morningstar’s report about U.S. fund flows for July 2021 is available here. Highlights from the report include:

  • Passively managed strategies pulled in $57 billion, mostly due to ETFs’ $49 billion inflow, while actively managed funds collected about $15 billion.
  • Demand for international-equity funds remained strong in July as they collected $30 billion, marking their ninth consecutive month of inflows.
  • Taxable-bond funds gathered $33 billion in July. While that was the most among category groups, it was their lowest intake since March 2020 when they shed $242 billion.
  • U.S. equity funds posted their first month of outflows since January as they bled $7.2 billion, though they had already lost momentum following a record intake in March.
  • Various sector-equity funds focused on value stocks suffered outflows in July after collecting strong inflows during the first six months of the year.
  • Funds focused on sustainability continued to gather assets at a healthy rate. After collecting about $14 billion in 2019, they picked up $52 billion in 2020 and have raked in over $45 billion in just the first seven months of 2021.

Key Takeaways from The Morningstar Funds Flow- A Break In Trend

  • Long-term mutual funds and exchange-traded funds collected $72 billion in July 2021, a modest intake relative to the heavy inflows seen in the first six months of the year.
  • Taxable-bond funds gathered $33 billion in July, just edging international-equity funds’ $30 billion intake for the highest total among U.S. category groups.
  • U.S. equity funds shed over $7 billion, with nearly all the group’s categories experiencing outflows.
  • Various sector-equity funds focused on value stocks suffered outflows after a streak of inflows to start the year.
  • Funds focused on sustainability continued to gather assets at a healthy rate with inflows on pace to easily eclipse 2020’s total.

Flows Into U.S. Equity and Sector Funds Retreat but Remain Strong Elsewhere

Long-term mutual funds and ETFs gathered $72 billion in July, a step down from June’s $109 billion and behind the average pace of $121 billion per month in the record-setting first half of 2021. Passively managed strategies pulled in $57 billion, mostly due to ETFs’ $49 billion inflow, while actively managed funds collected about $15 billion.

The shift is reflected in the market’s choice of investment vehicles. ETFs, which are nearly synonymous with passive management (96% of ETF assets are passively managed), continue to dominate U.S. equity fund flows and have also made headway in other sectors deemed to be more friendly to active management. Over the 10-year period ended July 2021, U.S. equity ETFs took in an astonishing $1.2 trillion, while open-end funds shed nearly $1.3 trillion. International-equity open-end funds managed to pull in positive flows over the same period, but they represented just 37% of the group’s total inflows. Taxable-bond funds fared better, with 61% of inflows accruing to open-end funds, though ETFs are slowly taking share. The month of July was a microcosm of the broader trends as investors fled active U.S. equity funds, favored passive international funds, and were evenly split across taxable-bond funds.

Enthusiasm for funds in other U.S. equity categories wasn’t much stronger in July. Investors redeemed most heavily from growth funds, with mid-growth funds suffering the steepest outflows of that group at $3.5 billion. Small- and mid-blend categories also experienced outflows, though large-blend funds took in $7.9 billion, led by flows into index-tracking funds and, more notably, funds with environmental, social, and governance considerations

Just as investors shunned diversified value-equity funds in July, they followed suit in sector-equity funds. Morningstar Categories bleeding the most assets in July included value-oriented sector funds that previously posted some of the strongest inflows through the first six months of the year. Financial funds shed $3.1 billion after taking in nearly $23 billion over the first half of the year—the highest total within the group. Equity energy funds dropped $1.1 billion, their first monthly outflow since September 2020. Natural-resources funds shed about $1.0 billion after collecting positive flows for 10 consecutive months (including a record $4.0 billion in May)

Access the full report here.

 

 

 

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $251 billion in assets under advisement and management as of June 30, 2021. The Company has operations in 29 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.