August’s mutual fund outflows reflected investors’ jittery mood, with money pouring out of most investment categories.
“This may be a long-term trend you’ll see,” said Alec Papazian, senior analyst with Cerulli Associates, in Boston. "While people have increased their risk tolerance, they’re also still very freaked out and any sort of (market) fluctuation can lead to big changes.”
Mutual funds experienced outflows of $32.6 billion in August, the highest net redemptions since November 2008, according to Cerulli. Only commodities and alternative funds managed to post positive flows.
Particularly striking was the international fund sector, which posted its third consecutive month of outflows for the first time since 2008.
Meanwhile, exchange-traded funds maintained positive inflows of $1.5 billion for August, despite suffering asset losses of 3.8%. Mutual funds’ assets fell 5.2%, according to Cerulli.
Investors seemed to be redirecting their money largely into taxable money-market funds; the category had $73.6 billion of inflows in August. But broad, diversified, passive funds appeared to benefit from August’s turbulence as well.
Vanguard’s Total Stock Market Index Fund garnered $2.6 billion of inflows in August, and its Total International Stock Index Fund was a winner too, with nearly $1.5 billion of net new money in August, Cerulli reported.
The funds led the field in net inflows in the domestic stock category and international stock categories, respectively. But that’s been true all year, by a wide margin: Vanguard Total Stock Market Index has attracted $9.8 billion of net new assets through August, and its international counterpart has attracted $9.2 billion.
It’s likely that many investors have been using the Vanguard funds as “placeholders” in turbulent times as they decide how to allocate their funds, Papazian said.
American Funds, meanwhile, continues to have a tough year. The company’s Growth Fund of America had the largest outflow of any U.S. stock mutual fund in August -- $3.3 billion. And its Capital World Growth & Income Fund was the biggest loser in its category, with net outflows of $1 billion.
As far as asset categories, taxable bond funds got creamed in August, losing $12.1 billion to outflows in their worst month since October of 2008, according to Cerulli. Bank loan funds took a beating as well, with $7.3 billion of net outflows.
Commodity and alternative mutual funds gained $1 billion and $486 million, respectively, as the only mutual fund categories to attract more investor dollars than they lost in August. Alternative ETFs did well too, nabbing $46 billion in net inflows in August.
“That really comes from (investors) seeking ever more diversification,” Papazian said.
Keys to look for in September will include how quickly investors will return to the market if it stabilizes, whether international stock funds will recover and whether tax-free muni bonds will continue to see outflows as they did in August.