Demand for Equity Strategies Sets Record Pace

Inflows to equity strategies remained strongly positive in September, clocking in at $40 billion for equity mutual funds and ETFs.

The pace brings net intakes for the first three quarters of 2013 to $332 billion, according to research from Strategic Insight, an Asset International company. That means total inflows for 2013 could approach $400 billion, a figure that would surpass all prior records for equity flows.

“As we have projected, 2013 has been the year for stock funds and we anticipate that trends evidenced this year would accelerate in 2014,” said Avi Nachmany, cofounder and director of research at Strategic Insight.

The September growth in equity strategies was matched by $5 billion of net redemptions from bond mutual funds and ETFs, leaving year-to-date net inflows for the category at $27 billion. Researchers called that the weakest demand for bond strategies seen in nearly a decade.

On the domestic equity mutual fund front, September saw $31 billion of inflows during the third quarter. Excluding ETFs, U.S. equity funds netted $12 billion in September, closing the third quarter with $61 billion of net inflows.  

Although September demand favored international strategies as developed European economies showed signs of improvement, quarterly net intake split nearly evenly between domestic and international categories. Researchers expect long-term equity mutual funds, excluding ETFs, to exceed $250 billion in annual net intake for 2013.

Not surprisingly, investor uncertainty over the Federal Reserve’s intentions to eventually start tapering its bond purchasing policies, coupled with federal and municipal fiscal issues, resulted in consistent net redemptions for both taxable and tax-free bond funds (excluding ETFs). Those worries translated to quarterly withdrawals of $50 billion—the hardest quarter on record for bond mutual funds.

Other figures published by Strategic Insight indicate U.S. equity ETP inflows—a distinction including both exchange traded funds and exchange traded notes—netted $12 billion during September. Investor desire for emerging markets and European exposures led to international equity inflows of $15 billion during the month.   

The report also described strong growth in intermediary-solid channels, a category which includes private bank, individual, independent, regional, registered investment adviser, and most wirehouse broker/dealers. Together these channels aggregately drove $194 billion of equity mutual fund and ETF inflows.

More information on Strategic Insight’s research is available here.