Investors Turn Icy on Active Equity Funds

(October 5, 2012) — Actively managed equity funds have not seen net inflows in nearly 18 months as investors have turned their backs on paying fees, data this week has shown.

As a sector, active equity funds have lost more money from investors pulling out of mandates than they have achieved with new sales each month since April 2011, market monitor EPFR said today.

The reason cited was investors looking to cut fees paid to managers when costs have become an important consideration.

More generally, developed market equities overall lost a combined $71.5 billion in investor mandates in the first nine months of the year. This compared with a $62 billion lost in the same period last year, although the bulk of the losses in 2012 came in the first half of 2012.

Investors continued to flock to bonds in a search for yield in the third quarter of the year, EPFR said. By the end of September, high-yield bonds more than doubled the total amount of inflows the asset class experienced in the whole of last year. Some $64.1 billion net new assets came into the sector, almost half of which was collected in the last three months.

Bonds, as a distinct asset class, are on course to break the 2010 record for inflows, EPFR said.

However, short, medium, and long-term US government bond funds all saw net outflows each month of the third quarter.

Investors were tempted back to financials, EPFR said, with the sector’s equity funds seeing the first quarterly inflows since the last three months of 2008.

Commodities received a boost as investors, fearing the worst, took flight to safe haven assets, including gold and other precious metals.