Forrget Mutual Funds

August 30, 2006

BGI leads all mutual fund families for asset growth in July, while investors pull $2+ billion out of Fidelity.

Talk about a sign of the times: Barclays Global Investors (BGI) led all mutual fund families for asset growth in July, while Fidelity experienced serious outflows. 

According to the Financial Research Corp. (FRC), investors poured $4.7 billion into BGI funds in July, as investors continued to embrace the exchange-traded fund (ETF) revolution.  BGI's iShares Russell 2000 ETF (NYSE: IWM) was the single best selling mutual fund in July, pulling down $3.93 billion in new assets.  State Street Global Advisor's (SSgA's) SPDR (AMEX: SPY) ETF was the second best-selling fund, with inflows of $2.18 billion.

On the other side of the spectrum, Fidelity Investments - the grandfather of active management -- saw net outflows of $2.24 billion in July.  Fidelity claims that the figures are skewed because they don't include money market funds, but the trend is hard to ignore: ETF assets up, active assets down.  You have to wonder if Fidelity is looking at the ETF market in a new way these days...

Of course, not all active assets were down. American Funds continued to pull in assets at a staggering pace, posting $3.46 billion in net new money. Those funds came despite growing concerns that American's most popular funds have become closet indexers and are now too large to manage effectively.

Even including the American Funds data, however, the momentum has clearly shifted to the passive/ETF side. No wonder Morgan Stanley recently said that ETF assets could top $2 trillion by 2010.

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