Morningstar: Rising Markets Spurred Record Demand for Funds in 2017

Globally, mutual funds and exchange-traded products amassed nearly $2 trillion in inflows last year, more than double 2016’s tally

CHICAGO, May 21, 2018 /PRNewswire/ — Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today published its sixth annual Global Asset Flows Report examining worldwide 2017 mutual fund and exchange-traded product (ETP) asset flows. Worldwide flows reached nearly $2 trillion in 2017 compared to $835 billion in 2016, led by nearly $800 billion in estimated U.S. flows and approximately $642 billion in cross-border flows, which are funds that tend to be domiciled in tax havens and distributed in many markets, including Europe, Asia, Latin America, and the Middle East.

“Favorable market conditions across the globe in 2017 attracted the greatest flows in more than a decade. Rallying equity markets, subdued volatility, and stable interest rates appear to have lifted investor confidence worldwide,” said Kevin McDevitt, senior analyst. “While all asset classes saw inflows, investors showed a preference for fixed-income funds in a stable rate environment.”

Highlights from Morningstar’s 2017 Global Asset Flows Report include:

Global net flows reached nearly $2 trillion in 2017, led by nearly $800 billion in estimated U.S. flows and an estimated $642 billion in cross-border flows. Cross-border flows saw 13.0 percent organic growth, more than twice Europe’s 6.0 percent. Growth was also strong across emerging markets, with 10.1 percent growth in Asia and 8.1 percent in Latin America.

Given the robust performance of equities globally and particularly in emerging markets, it’s unsurprising that equities gained about 24 percent (in U.S. dollars) as measured by the MSCI All-Country World Index. Led by India and China, emerging markets returned 37.3 percent as measured by the MSCI Emerging Markets Index.

Despite stubbornly low interest rates, investor appetite for fixed income was healthy. Fixed-income funds garnered an estimated $830 billion in inflows while equity funds gathered approximately $580 billion. Bond funds’ 12.6 percent year-over-year organic growth rate was second only to alternative funds, which grew 13.4 percent.

Passive equity funds continued to take market share from their active counterparts across the board with $662 billion in inflows. However, when it came to passive fixed-income funds, the United States was the only market in which they grew their market share with $210 billion for passive versus $176 for active.

Among fund families, BlackRock led the industry with about $400 billion in inflows, thanks largely to its iShares exchange-traded funds (ETFs). Following closely behind was Vanguard with inflows of $385 billion. The two held a combined $7.5 trillion in mutual-fund and ETF assets at the end of 2017, nearly equal to the $7.9 trillion of assets managed by their eight largest competitors combined.

Demand for equity funds resurged in 2017 after tepid inflows of approximately $17 billion in the previous year. After shunning stock funds in 2016, U.S. investors directed nearly $300 billion into equity funds, although $240 billion of these inflows went to non-U.S. equity funds. In addition, Asian equity funds took in $72 billion in inflows.

The Morningstar Global Asset Flows Report is based on assets reported by more than 4,000 fund groups across 85 domiciles. The report represents more than 95,000 fund portfolios encompassing more than 240,000 share classes and includes a global overview as well as analysis about the United States, Europe, Asia, and cross-border offerings. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETPs by computing the change in shares outstanding.

To view the complete report, please click here.

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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, retirement plan providers and sponsors, and institutional investors in the 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, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $201 billion in assets under advisement and management as of March 31, 2018. The company has operations in 27 countries.

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