Vanguard took in record $24.3B in mutual fund flows last month

Most cash went into stock funds as market signaled inproving economy
APR 12, 2013
By  Bloomberg
The Vanguard Group Inc., the biggest U.S. mutual fund firm, attracted a record $24.3 billion from clients last month, mostly into stocks, as signs of an improving U.S. economy prompted investors to return to equities. January's deposits were over 40% higher than the previous monthly record of $16.8 billion in January 2012, John Woerth, a spokesman for Vanguard, wrote in an e-mail. About $20 billion of last month's total went into stock-oriented mutual funds and exchange-traded products. Fund investors stepped up their investments in equities as signs of improvement in the U.S. economy sent the S&P 500 up 5% last month and pushed the Dow Jones Industrial Average to 14,000 for the one-week period ended Feb. 1. It was the first time since 2007 that the Dow hit that mark. Domestic stock funds, which have experienced redemptions for the past six calendar years, won $16.1 billion in the first three weeks of January, according to the Investment Company Institute. “People may have looked at the market's performance and said, "Gee, I am missing out on an opportunity,'” said Michael Rawson, a fund analyst for Morningstar Inc. “I am not surprised the flows into stocks are strong.” U.S. mutual funds collected $64.8 billion in net deposits in the first three weeks of January, on track for the biggest month on record for deposits, according to the ICI. The previous record for a full month was $52.6 billion in May 2009, ICI data show. Equity mutual funds gathered $29.9 billion in the three-week period, more than for any full month since 2006. ETFs gathered $31 billion last month, about $29 billion of which went into equity-oriented products, according to research firm Index-Universe LLC. Vanguard, which manages $2.07 trillion in U.S. fund assets, is known for its low-cost funds, which mimic the performance of indexes. Vanguard's equity mutual funds charge 11 cents for every $100 invested, compared with 78 cents for the industry as a whole, according to data from Lipper Inc. With $246 billion in exchange-traded funds, Vanguard was the third-largest provider of U.S. ETFs as of Dec. 31, behind BlackRock Inc. and State Street Corp., according to data from State Street.

INDEX SWITCH

In a bid to cut ETF costs, Vanguard said in October it would adopt benchmarks from FTSE Group for six international stock index funds and benchmarks developed by the University of Chicago's Center for Research in Security Prices for 16 U.S. equity and balanced funds. The decision didn't hurt the popularity of the firm's ETFs, Mr. Woerth said. Vanguard attracted $10.2 billion in ETF deposits last month, and new money has increased in almost all the company's ETFs since the October announcement, he said. One ETF that has been affected adversely by the switch is the firm's largest, the $62 billion Vanguard FTSE Emerging Markets ETF. Unlike the competing MSCI Emerging Markets Index, the FTSE product doesn't track South Korean stocks. Since Oct. 1, rival BlackRock's iShares MSCI Emerging Markets Index, which includes Korea, won more than $12 billion in deposits, compared with less than $500 million for the Vanguard offering, according to data from IndexUniverse. In the first nine months of last year, the Vanguard ETF took in about seven times more money than the BlackRock fund.

Latest News

Judge OKs more than $90 million in settlement money for GWG investors
Judge OKs more than $90 million in settlement money for GWG investors

Mayer Brown, GWG's law firm, agreed to pay $30 million to resolve conflict of interest claims.

Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs
Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs

Orion adds new model portfolios and SMAs under expanded JPMorgan tie-up, while eMoney boosts its planning software capabilities.

Retirement uncertainty cuts across generations: Transamerica
Retirement uncertainty cuts across generations: Transamerica

National survey of workers exposes widespread retirement planning challenges for Gen Z, Millennials, Gen X, and Boomers.

Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future
Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future

While the choice for advisors to "die at their desks" might been wise once upon a time, higher acquisition multiples and innovations in deal structures have created more immediate M&A opportunities.

Raymond James continues recruitment run with UBS, Morgan Stanley teams
Raymond James continues recruitment run with UBS, Morgan Stanley teams

A father-son pair has joined the firm's independent arm in Utah, while a quartet of planning advisors strengthen its employee channel in Louisiana.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave