Mutual Funds Set to Pass $15T

The U.S. mutual fund industry (open- and closed-end funds, and exchange-traded funds) is set to surpass $15 trillion in assets in February, according to Strategic Insight.

This new industry milestone is achieved by the combination of continued stock market appreciation and renewed investor demand for stock and bond funds. January marked a new record for the fund industry, as monthly net intake for stock and bond mutual funds rocketed to $90 billion (see “Beyond the January Effect”). In addition to these strong inflows, another $30 billion were added to exchange-traded funds (ETFs) during January.  

“Assuming modest economic expansion this year, it is plausible that annual stock and bond fund flows exceed $500 billion, more than 50% above the previous annual record,” said Avi Nachmany, SI’s director of Research.    

For the first time in a few years, monthly net intake in January was weighted more towards stock and balanced funds than towards bond funds. This trend is likely to persist throughout 2013, barring a major market disruption. Among the $48 billion flowing into equity and balanced funds, more than half went to U.S. equity funds with the balance going into international stock funds.

January set the all-time record for monthly flows into actively-managed stock and bond funds in the amount of $72 billion (or 80% of total mutual fund flows). The previous record for monthly net flows into actively-managed funds was set in January 2007 with $46 billion.   

“Remarkably, January witnessed rapidly expanding demand for a very wide range of investment strategies: U.S. stock and balanced funds; emerging and developed international market stock funds; value and growth strategies; and fixed income, with the exception of U.S. Government bond funds,” added Nachmany. “The two parallel rotations taking place in the fund industry will continue in 2013 and beyond—the rotation towards stock investing and the rotation from cash accounts to bond and income strategies.”   

Exchange-traded products (ETPs), including exchange-traded notes (ETNs), attracted $30 billion of net intake in January. Flows into stock-oriented products accounted for 97% of ETP inflows. International equity ETFs netted $15 billion of inflows during the month, while domestic equity netted $14 billion.  

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