In December, long-term U.S. funds had their greatest monthly outflows since October 2008 at $83 billion, and inflows for the year were the lowest since 2008. Money market funds saw inflows of $57 billion, for their best year since 2008, according to the Morningstar Direct Asset Flows Commentary for December and the year ending December 31 2018.
But it wasn’t a simple tale of flight-to-safety triggered by fourth-quarter volatility. U.S. equity funds, in fact, showed inflows of $14.1 billion. Investors were moving from active funds to passive ones. Investors pulled a record $143 billion from actively managed funds while moving $60 billion to passive funds.
In other highlights from the report:
- December outflows spanned asset classes, with U.S. equity funds the only major group showing significant inflows—$14.1 billion despite December’s sell-off. On balance, these inflows went to passive funds. For all of 2018, long-term funds collected $157 billion in inflows, less than half the $350 billion average for 2008-17.
- December’s outflows mostly came from actively managed funds, with investors pulling a record $143 billion, while passive funds collected nearly $60 billion in inflows. American Funds suffered the most with $8.7 billion in outflows, the fund family’s most since December 2011.
- Taxable-bond funds had their greatest outflows since June 2013, $43 billion, as investors continued to cut credit risk and seek shelter among high-quality, short-duration vehicles. Intermediate-term bond funds got hit hardest with $17.0 billion in outflows, the Morningstar Category’s worst month since August 2013.
- International equity, sector equity, allocation, and alternative funds all had their greatest outflows in at least 10 years in December.
- iShares dominated December flows with a firm-record $36.1 billion, more than triple that of runner-up Vanguard’s $11.4 billion in inflows. Vanguard still came out ahead for 2018 with nearly $161 billion in inflows to iShares’ $136 billion.
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