Tags: ETFs | stock | mutual | funds

Investors Shift to ETFs from Actively Managed Stock Funds

Monday, 07 Jan 2013 08:57 AM

By Dan Weil

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Investors are flocking to exchange-traded funds (ETFs) from actively managed stock mutual funds.

The move comes amid fear of more market crashes like the ones of the past 13 years and disappointment with the returns achieved by the stock-picking funds, The Wall Street Journal reports.

In the first 11 months of last year, investors withdrew $119.3 billion from actively managed stock mutual funds, the biggest outflow in any year since 2008, according to Morningstar data cited by The Journal. Meanwhile, stock ETFs attracted $30.4 billion.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

"ETFs have really won people over," Deborah Fuhr, a partner at ETF research firm ETFGI, tells The Journal.

As for returns, U.S. mutual funds investing in large-cap growth stocks produced a total return of 15.3 percent last year, compared with 16.4 percent for similar ETFs and 16 percent for the Standard & Poor’s 500 index, according to Morningstar.

At the same time, ETF fees can be as low as 0.1 percent, while some actively managed fund fees top 1 percent.

"That U.S.-listed exchange-traded funds are closing out 2012 with such strong asset gathering … does engender a whole range of questions over the future of capital markets and especially equities," Nicholas Colas, chief market strategist at financial technology firm ConvergEx, said last month, according to CNBC.

"The data is clear: ETFs aren't just here to stay, they are here to conquer."

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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