BMO Capital Markets analysts David J Chiaverini and Richard Fellinger analyze fund flows to mutual funds and ETFs during the month of March in their April 16, 2014 research note covering the diversified financials industry in the US.

Fixed income (mutual funds) makes a comeback

In an interesting development, fixed income inflows to US mutual funds during March ($17.0 billion) surpassed equity fund inflows ($15.9 billion) for the first time since May 2013.

Secondly, aggregate inflows to both equity mutual funds and ETFs during March, at $26.3 billion, were much lower than during February 2014 ($34.0 billion), and March 2013 ($34.1 billion).

1-flows Equity Fund

Overall flows into mutual and exchange traded funds during March were $47.1 billion, down from $71.0 billion in February and $66.7 billion in March last year.

However, mutual fund inflows and total inflows are ahead of their six monthly averages though ETFs are somewhat lower.

Mutual fund flow trends

2-mf-trend Equity Fund

Equity Fund flow trends

3-mf-trend Equity Fund

BMO’s picks based on fund flows and latest estimated AUM

“Our top traditional asset manager picks are BlackRock, Inc. (NYSE:BLK) and Franklin Resources, Inc. (NYSE:BEN), while our top alternative manager picks are Apollo Global Management LLC (NYSE:APO) and The Blackstone Group L.P. (NYSE:BX),” say the BMO analysts.

BlackRock, Inc. (BLK)

BMO rates BlackRock, Inc. (NYSE:BLK) as an Outperform with a price target of $355.00 citing:

  • Leader in managing passive investments
  • Strong growth in retail business
  • Will benefit from investor preference for unconstrained fixed income products
  • The Blackrock Solutions business is a market differentiator

4-blk-flows Equity Fund

Franklin Resources, Inc. (BEN)

BMO rates Franklin Resources, Inc. (NYSE:BEN) as an Outperform with a price target of $62.00 citing:

  • Company will benefit from rotation to equities
  • Stellar relative performance in fixed income funds and improved equity product performance
  • Outflows from the flagship Global Bond Funds may not be as extreme as the market fears

5-ben-flows Equity Fund

Ratings of Apollo Global Management LLC (NYSE:APO) and The Blackstone Group L.P. (NYSE:BX) are both Outperform and their price targets are $38 and $35 respectively.