Passive funds lead demand - Monthly US Fund Highlights September 2016 Report

Net new flows to long-term mutual funds and ETPs totalled US$14.1 billion in September. Active and passive strategies continued to experience divergent trends in net investments. Passive funds led demand with US$37.7 billion of inflows (including US$27.5 billion to ETPs), while actively managed funds experienced aggregate net redemptions of US$23.6 billion in September.

Taxable Bond funds saw the strongest demand among long-term funds, attracting US$22.1 billion of net inflows. The space’s year-to-date flows of US$168.4 billion represent a substantial increase over the US$39.9 billion seen during the first nine months of 2015. Taxable Bond flows in September were fairly evenly split between active and passive strategies, as active funds experienced net investments of US$9.4 billion and passive funds gathered net flows of US$12.7 billion.

Active US and International/Global Equity funds saw outflows of US$36.9 billion in September, while index equity exposures attracted net inflows of US$24.6 billion. Net outflows among active funds were driven by redemptions in large capitalization strategies. Global and Alternative strategies, including Global Total Return, Managed Futures, and Commodities Broad-Based, gathered positive net flows among active funds in September.

Net redemptions from Money Market funds in September totalled US$21.1 billion. Taxable Money Market funds experienced comparatively flat inflows of US$1.9 billion, while Tax-Free Funds saw US$23.0 billion of net withdrawals. The approaching October deadline for money market funds to comply with new regulations caused an even greater bifurcation among Taxable Money Market funds, as government funds saw net deposits of US$220 billion while prime money market funds experienced net redemptions of US$245 billion.