March 11, 2019

Investors Rediscover Domestic Equity Mutual Funds

by Pat Keon, CFA.

Domestic equity mutual funds have taken in $4.3 billion in net new money since the start of the year. If this increase holds through the end of March, it will be the first quarterly net inflow for domestic equity mutual funds in four years. The group has suffered fifteen consecutive quarterly net outflows since Q1 2015 (+$5.3 billion), during which time its coffers have decreased by $727.4 billion. The worst stretch during this interval occurred from February 10, 2016 through December 20, 2017, when the group had net outflows for ninety-seven out of ninety-eight weeks, for a total of -$361.8 billion. The fifteen-straight quarterly net negative flows are the longest and most severe in the group’s history, far outdistancing the seven straight decreases from Q2 2011 through Q4 2012, during which time the group experienced total net outflows of only $179.8 billion.

Taking a more granular look at the domestic equity mutual funds group shows while the majority of the peer groups have continued to suffer net outflows in Q1, significant net positive flows for a handful of peer groups have carried the day. The largest net inflows in Q1 to date belong to S&P 500 Index Funds (+$8.6 billion), Multi-Cap Core Funds (+$1.2 billion), and Small-Cap Value Funds (+$1.2 billion). At the fund level, the most significant net positive flows for the first two peer groups belonged to Fidelity products, as Fidelity 500 Index Fund and Fidelity Total Market Index Fund recorded increases of +$7.6 billion and +$1.4 billion, respectively. For the Small-Cap Value Funds classification, the net inflows were more widely dispersed, with MFS New Discovery Value Fund registering the largest at +$362.7 million.



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