Investors had been pulling huge and growing amounts of cash out of these funds each year for almost a decade, even as the U.S. market hit new highs. Then they withdrew only a relatively modest sum in 2013, likely because domestic stocks were robust and showed lower-than-average volatility, says Shelly Antoniewicz, senior economist at the Investment Company Institute, the mutual-fund trade group.
Now the respite is over — and investors are making up for lost time. Actively managed U.S.-stock funds have seen more selling than buying for seven consecutive months, with about $70 billion out the door for the year through September, according to estimated data from investment researcher Morningstar Inc.
‘Active management has never been in worse repute’
Yes, investors are still sinking money into U.S. stocks. But increasingly they are doing it through traditional index mutual funds and exchange-traded funds that track a specific market benchmark or sector, without the variability of a fund manager’s hand. While active stock funds have been seeing uninterrupted outflows, passive U.S.-stock funds have collected inflows for eight months in a row.
Meanwhile, other broad categories are booming, too. Investors are piling into bond funds and both active and index international-stock funds.