June 13, 2019
Mutual funds inflows continue despite a negative Q4
The shift to low-cost investment products continues
PHOENIX — According to the 2019 Pershing Asset Flows Barometer, released today by BNY Mellon’s Pershing (“Pershing”), net inflows into mutual funds and exchange-traded funds (ETFs) followed similar trend lines over the trailing 12 months ending March 31, 2019, with mutual funds experiencing net inflows of $4 billion compared to $26.6 billion in net inflows into ETFs.
The only exception to the norm was the fourth quarter of 2018, when mutual funds suffered outflows even as ETFs experienced inflows.
“The downward market pressure in the fourth quarter contributed to mutual fund outflows we experienced on our platform,” said Rich Calvario, director of investment solutions at Pershing. “While fleeing from active management in a volatile market may be counterintuitive, it is likely that financial professionals were deploying tax loss harvesting strategies to offset a portion of their losses before year-end.”
After experiencing outflows of $8.3 billion in the fourth quarter, mutual funds made a dramatic recovery in the first quarter, recording $4.8 billion in net inflows. Meanwhile, inflows into ETFs spiked in the fourth quarter, reaching $9.1 billion, but normalized in the first quarter of 2019, finishing the quarter with $6.4 billion in net inflows.
Financial professionals move funds into large-blend equities and ultrashort bonds in an uncertain market: In the fourth quarter, net inflows into large-blend and foreign large-blend equities reached $3.8 billion, with ETFs recording inflows of $4.6 billion, more than offsetting the approximately $800 million in outflows from mutual funds in these categories.
In contrast, both product types experienced outflows from high-yield bonds and inflows into ultrashort bonds: Mutual funds and ETFs experienced net outflows of $616 million and $391 million, respectively, in the high-yield bond category, and net inflows of $1.1 billion and $1.4 billion, respectively, in the ultrashort bond category.
The move to institutional shares accelerates: Institutional shares accounted for approximately 330 percent of the total mutual fund net flows for the trailing 12 months ending March 31, 2019. This is in contrast to prior period when flows into institutional shares accounted for 108 percent of total mutual fund net flows. Institutional shares usually have lower expense ratios than retail share classes and typically don’t include sales charges.
Further, assets on Pershing’s no-transaction-fee platform, FundVest®, increased in the first quarter of 2019 by almost 13.4 percent over the prior quarter, driven by institutional shares.
Meanwhile, in the 12 months ending March 31, 2019, net outflows from load and retail no-load shares exceeded $9 billion.
Pershing responds to financial professionals’ needs, adds new managers to the FundVest® ETF platform: In the first quarter of 2019, assets on Pershing’s no-transaction-fee ETF platform, FundVest ETF, reached $4.3 billion, more than doubling since March 31, 2018.
In response to the increased demand by financial professionals, Pershing today announced that it has expanded its FundVest ETF platform. Seven new fund families, which include American Century, DWS Group, Janus Henderson, KraneShares, ProShares, USCF Investments, and Virtus, have been added, along with 65 additional funds from existing providers First Trust, Exchange Traded Concepts, Pimco and Wisdom Tree.
“Our no-transaction-fee ETF platform has experienced consistent growth since its launch two years ago,” said Justin Fay, director of product management for alternative investments and ETFs at Pershing. “We continue to bring our clients a broad selection of products and solutions at the most competitive levels. The expansion of providers on the FundVest ETF platform speaks to our commitment to meeting the evolving needs of our clients.”
About Pershing Asset Flows Barometer
Pershing Asset Flows Barometer takes a holistic look at how financial professionals have guided their clients’ investments over the past year and identifies relevant trends. The data is compiled from approximately 1,300 Pershing clients, over 30 million individual positions, with $680 billion in ETFs and mutual fund assets under custody.