Passive Funds Led Investor Demand in October

Net new flows to long-term mutual funds and exchange-traded products (ETPs) totaled $8.3 billion in October, according to Strategic Insight, parent company of PLANSPONSOR.

Active and passive strategies continued to experience divergent trends in net investments. Passive funds led demand with $34.4 billion of inflows (including $15.7 billion to ETPs), while actively managed funds experienced aggregate net redemptions of $26.2 billion in October.

Taxable Bond funds saw the strongest demand among long-term funds, attracting $17.1 billion of net inflows. This segment has attracted $185.6 billion of net flows in the year-to-date period, a substantial increase over the $58.3 billion seen during the first ten months of 2015. Taxable Bond flows were nearly evenly split between passive ($8.8 billion) and active ($8.3 billion) strategies during October.

Active U.S. and International/Global Equity funds saw outflows of $35.9 billion in October, while index equity exposures attracted net inflows of $25.4 billion. Net outflows among active funds were driven by redemptions in large capitalization strategies.

Net deposits into Money Market funds in October totaled $6.0 billion. Taxable Money Market funds experienced inflows of $6.0 billion, while Tax-Free Funds saw minor net withdrawals of $400 million. Taxable Money Market funds have continued to experience a significant bifurcation driven by recently-enacted regulations, as government funds saw net deposits of $103 billion while prime money market funds experienced net redemptions of $96 billion.