Equity fund investors appear to be exiting from mutual funds and investing in ETFs instead. The ICI reported net redemptions of $64.673 billion for U.S. equity funds and $42.887 billion for all equity funds for the year to date. At the same time, equity ETFs are booming. ETFs/ETPs saw net inflows of $130.766 billion for the year to date through July, and equity ETFs/ETPs gathered the largest net inflows with $75.852 billion, followed by fixed income ETFs/ETPs with $41.353 billion, according to London-based ETFGI.
Deborah Fuhr, a partner with ETFGI and author of the firm’s monthly industry insights says the reason is that it’s “hard to find active equity funds that consistently deliver alpha. In the U.S. last year, 81.2 percent of active large cap managers did not beat the S+P 500 index. Investors know this has been the case for a many years. Investors are also familiar with equity indices and the exposures they represent, and ETFs are very cost efficient. “