March 4, 2014

Morningstar: Typical strong Q1 inflows. International leads the way

Morningstar’s report for February 2014 shows strong inflows driven by investor confidence. International equity funds continue to exhibit the strongest inflows, as they did throughout 2013. In contrast, emerging markets currencies weakened during the first month of the year, with the MSCI emerging market index falling 6.5%. US equity funds lost $1.5 billion in outflows and nearly half of all active funds were in the red by month’s end.

January’s strong performance is due in part to the seasonality of flows—contributions to IRA’s, 401ks and the investment of bonus money all generally occur at the beginning of the year. Additionally, January and April tend to be the strongest months for inflows as January is the first month to fund a new IRA for the year and April is the last month to do so.

Non-traditional bond funds and bank-loan funds continue to be popular. Neither type of fund is as stable as core bond funds tend to be. Outflows from core bond funds along with equity appreciation have potentially made investor portfolios more volatile than they were at the same time last year.

Between January 2009 and May 2013, emerging markets took in an average of $1.1 billion per month, but have lost an average of $1.4 billion per month since then. Assets pealed at $86.7 billion in April 2013, but have fallen to $66.3 billion currently.

PIMCO is still suffering outflows, driven largely by PIMCO total return. There were several PIMCO manager changes in January, spurring Morningstar’s Eric Jacobson to hold a call addressing investor concerns. A replay can be found on the Morningstar website.

Goldman Sachs Strategic Income led the non-traditional bond category for flows this month. Fidelity is still on both the top and bottom flowing fund lists while it reorganizes its fund-of-funds lineup. And, finally, Oakmark International brought in $1.5 billion despite being closed to new investors.

You can find Morningstar’s complete report here.

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