Citi analysts William R Katz, Neil Stratton and Steven J Fullerton dissect U.S. mutual fund flows in September in their research work “September U.S. MF Trends: Flows Recover But Usual Suspects Standout” of October 14, 2013.
Here are key insights from the report.
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Retail interest high despite politics
Retail inflows were $78B in September comprising $34B in long-term inflows and $43B in money market flows. On an MTM basis long-term flows jumped $61B of which $32B accrued to Equities and $28B to Fixed Income. This was creditable given the volatile markets and the uncertainty in Washington due to the shutdown and debt ceiling.
Long-term fund lows (U.S. industry as a whole) higher
Net long-term inflows grew 3.5% on an annualized basis to $34B in the month. This comprised $39B (+6%) in Equity flows and $5B (-2%) in Fixed Income. This was a significant improvement over August, which printed net outflows of $26B (-3% annualized). It is interesting that within Equity, International flows of $7B grew 11%, much higher than Domestic flows of $15B (+3%).
Investors partial to passively managed funds
There was a decided preference for passive funds compared to active funds as seen from the table below:
|Long-term||Active ($B)||Annualized Growth||Passive ($B)||Annualized Growth|
Fund Flows amongst key players – Equities
|WisdomTree Investments, Inc.(NASDAQ:WETF)||+29%|
|Affiliated Managers Group, Inc.(NYSE:AMG)||+17%|
|Janus Capital Group Inc(NYSE:JNS)||+10%||-19%|
|Eaton Vance Corp(NYSE:EV)||-6%|
Citi: “Flows continue to generally accrue to a select number of players, leaving individual company dynamics mixed for much of our coverage.”
Fund flows amongst key players – Fixed Income
Affiliated Managers Group, Inc. (NYSE:AMG), BlackRock, Inc. (NYSE:BLK), Waddell & Reed Financial, Inc. (NYSE:WDR), Invesco Ltd. (NYSE:IVZ) and Eaton Vance Corp (NYSE:EV) were the winners. Big losers were Ameriprise Financial, Inc. (NYSE:AMP) at -16% annualized, and Federated Investors Inc (NYSE:FII) at -12% annualized.
Citi’s sector picks
Citi’s key pick amongst Traditional asset managers is Invesco Ltd.(NYSE:IVZ), the rationale being the benefits that could accrue due to a continued liberal Fed stance. The Blackstone Group L.P.(NYSE:BX) is favored by Citi in the Alternative asset management space. LPL Financial Holdings Inc (NASDAQ:LPLA) looks promising in the Broker/Dealer Sector.