Morningstar: positive flows, but not out of the woods yet

Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today reported estimated U.S. mutual fund and exchange-traded fund asset flows through September 2011. Long-term mutual fund flows turned positive in September for the first time in three months with inflows of $3.8 billion. However, that did not necessarily signal positive sentiment, as inflows were tepid across most asset classes and U.S.-stock funds experienced additional outflows. Furthermore, outflows from money market funds no longer appear to be flowing into long-term mutual funds. For the year to date, including another $14.1 billion in September, investors redeemed about $70.0 billion more from money market funds than they added to long-term mutual funds. U.S. ETFs, which have seen just one month of net outflows in the last 12 months, added $4.1 billion in September. Nevertheless, total industry assets dipped below $1.0 trillion in September for the first time since December 2010.

Additional highlights from Morningstar's report on mutual fund flows:

• While U.S.-stock funds continued their run of outflows, losing another $6.9 billion during the month, September was the best month for the asset class since May. However, with the exception of large-blend funds, the eight other major domestic-equity categories all suffered outflows.
• International-stock funds saw positive, yet modest inflows of $3.2 billion. Diversified emerging-markets funds again accounted for the majority of these inflows. The category recorded inflows of $2.7 billion, its greatest monthly intake since March 2011.
• Taxable-bond funds bounced back in September with inflows of $3.5 billion after shedding $12.0 billion in August, but this monthly inflow is well below the three-year monthly average of $16.1 billion for the asset class.
• Municipal-bond funds enjoyed their best month in nearly a year with inflows of $1.7 billion.

Additional highlights from Morningstar's report on ETF flows:

• For the second consecutive month, taxable-bond ETFs had the strongest inflows of any Morningstar ETF asset class, collecting $5.0 billion.
• Behind taxable-bond offerings, international-stock ETFs, with $2.4 billion, realized the second-largest asset-class-level inflow in September.
• After managing inflows of just $394 million in August, U.S.-stock ETFs gave up $5.3 billion in September. Four of the five largest individual ETF outflows belonged to funds in the U.S.-stock asset class.
• Commodities ETFs experienced modest outflows of $200 million in September.

To view the complete report, please visit http://www.global.morningstar.com/septflows11.