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.
About BNY Mellon's Pershing
BNY Mellon’s Pershing and its affiliates provide advisors, broker-dealers, family offices, hedge fund and ’40 Act fund managers, registered investment advisor firms and wealth managers with a broad suite of global financial business solutions. Many of the world’s most sophisticated and successful financial services firms rely on Pershing for clearing and custody, investment and retirement solutions, technology, enterprise data management, trading services, prime brokerage, managed account technology and operations and business consulting. Pershing helps clients improve profitability and drive growth, create capacity and efficiency, attract and retain talent, and manage risk and regulation. With a network of offices worldwide, Pershing provides business-to-business solutions to clients representing more than seven million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Professionally advised managed accounts are offered through its affiliate, Lockwood Advisors, Inc., which is an investment adviser registered in the United States under the Investment Advisers Act of 1940. Additional information is available on pershing.com, or follow us on Twitter @Pershing.
About BNY Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of March 31, 2020, BNY Mellon had $35.2 trillion in assets under custody and/or administration, and $1.8 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.