Asset Managers Bleed $50 Billion as Industry Crisis Deepens
The business of picking stocks and bonds for clients is getting smaller by the day.
Seven top asset managers this week reported a total of $50 billion in third-quarter net redemptions, most of it from active funds, company filings show. The biggest losers: Franklin Resources Inc. with $22.1 billion, AllianceBernstein with $15.3 billion and Waddell & Reed Financial Inc. at $4.9 billion.
In the second quarter, that group of seven saw $34 billion in outflows. The tally is further evidence that investors, frustrated with high fees and mediocre performance of actively managed funds, are increasingly casting them off for low-cost passive investments. In the 12 months ended Sept. 30, active funds had redemptions of $295 billion while passive took in $454 billion, according to data from Morningstar Inc.
“The shift from active to passive is an accelerating secular trend,” said Benjamin Phillips, a principal with the consulting firm Casey Quirk by Deloitte. “It is not going away.”
Clear evidence of that: The publicly traded firm that lured the most cash in the third quarter, BlackRock Inc., with $55 billion, drew more than 90 percent of it in funds that track indexes. Vanguard Group, known for its low-cost index funds and ETFs, also attracted $78 billion in deposits in that period.
Rate Hike Fear Pushes High-Yield Bond ETF Over a Cliff
Right before Halloween, investors got scared by interest rate risk.
Outflows from the iShares iBoxx High Yield Corporate Bond exchange-traded fund (HYG), the top ranked ETF by assets in the junk bond market, set a new record on Thursday—almost eclipsing the $1 billion mark.
IShares’ high-grade corporate bond ETF (LDQ) also shed $785 million in assets. That brings net outflows over the past week for HYG and LQD to $1.4 billion and $1 billion, respectively.
Bond yields have been trending higher over the past week and month as the odds of a December interest rate hike by the Federal Reserve have swelled.
Despite these outflows, the search for yield is still going strong, according to Bloomberg Intelligence ETF analyst Eric Balchunas. The strong selling of HYG coincided with inflows to the Powershares Senior Loan Portfolio ETF (BKLN), which tracks the performance of shorter-term, floating-rate debt.
Oil falls as non-OPEC yet to pledge concrete output steps
Oil prices extended declines on Monday after non-OPEC producers made no specific commitment to join the OPEC in limiting oil output levels to prop up prices, suggesting they wanted the oil producing group to solve its differences first.
London Brent crude for December delivery LCOc1 was down 29 cents, or 0.6 percent, at $49.42 a barrel by 0750 GMT after settling down 76 cents on Friday.
NYMEX crude for December delivery CLc1 was trading down 29 cents, or 0.6 percent, at $48.41 a barrel, after closing down $1.02 on Friday.
Reference: Bloomberg,Reuters
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