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.
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 |
| Equity | +9 | +2% | +30 | +15% |
| Fixed Income | -13 | -5% | +8 | +19% |
| Net total | -4 | -1% | +38 | +16% |
Fund Flows amongst key players – Equities
| Equity | Gainers | Losers |
| WisdomTree Investments, Inc.(NASDAQ:WETF) | +29% | |
| BlackRock, Inc.(NYSE:BLK) | +20% | |
| Affiliated Managers Group, Inc.(NYSE:AMG) | +17% | |
| Invesco Ltd.(NYSE:IVZ) | +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.
