Index giants BlackRock and Vanguard dominated mutual fund and ETF inflows in April, while traditional active powerhouses such as Fidelity and Franklin Templeton continued to lose money to their passive counterparts.
According to Morningstar’s latest report on US mutual fund and ETF asset flows for April, passive US equity funds took in $18.2 billion in inflows while active US equity funds lost about $11.4 billion to outflows.
Among the top 10 US fund families by assets under management, BlackRock’s iShares business continued to dominate with about $17 billion in inflows in April, followed by Vanguard which had $12.3 billion in inflows.
Although Vanguard still leads for inflows for the year-to-date, the report notes that the firm's growth so far in 2018 continues to slow year over year. The firm took in an estimated $141.5 billion for the first four months of 2017, compared to the $71 billion it has pulled in so far this year.
Another asset manager facing slowing or stagnant growth is SPDR State Street Global Advisors, which has collected about $24 billion over the past 12 months versus the $168 billion pulled in by iShares.
Morningstar said while SPDR’s market share of 3.34% is basically flat over the 12-month span, iShares’ market share has grown from 6.93% to 7.54% during the same period. The report points to SPDR’s cost relative to that of iShares’ and other products as having an impact on investor demand.
Coincidentally, State Street has announced that it would reduce expense ratios for two fixed income ETFs and lower share prices for five equity ETFs.
The net expense ratios for the SPDR Bloomberg Barclays Mortgage Backed Bond ETF has been lowered to 0.06% from 0.2%, while the SPDR Bloomberg Barclays Issuer Scored Corporate Bond ETF will be cut to 0.06% from 0.16% on July 31.
‘By lowering costs and improving access to an array of investment exposures, these changes will help to ensure our clients and these SPDR ETFs are well positioned for long-term growth,’ said said Noel Archard, global head of product for State Street Global Advisors’ SPDR ETF business.
On the active front, Fidelity Investments had overall outflows of about $5.6 billion, which were mostly on the active side. Fidelity’s active funds lost about $11.3 billion in net redemptions while its passive funds had $5.7 billion in positive flows.
The storied mutual fund powerhouse had five funds included in the 10 Morningstar-tracked bottom funds in terms of net flows. These are: Fidelity Large Cap Stock fund, Fidelity Select Technology portfolio, Fidelity Value Discovery fund, Fidelity Contrafund fund and Fidelity Series Investment Grade Bond fund.
Fidelity’s mutual fund woes were also described in a recent New York Times article, which said the firm’s mutual funds have had outflows in each of the last 10 years no matter how well they have performed. The article said investors have pulled $181 billion from Fidelity’s actively-managed mutual funds since 2010.
In an interview with the Times, Fidelity’s chief executive Abigail Johnson said the the firm could no longer rely on just mutual funds, but instead aims to boost its assets under administration.
On a similar note, Franklin Templeton suffered another $2.8 billion of outflows in April, which brings the firm's total outflows to $29 billion over the past 12 months. In particular, the Franklin Income fund has seen nearly $6.2 billion in redemptions over the past 12 months, the Morningstar report said.