By Aaron Pressman
Dec 19 Vanguard Group said customers had
invested $130.4 billion in its mutual and exchange-traded funds
during the first 11 months of 2012, beating the fund industry's
previous annual inflow record.
The flows into Vanguard funds, mostly into equities,
exceeded the previous annual record of $129.6 billion set by
JPMorgan Chase & Co in 2008, according to fund research
firm Strategic Insight. Vanguard's previous high was $104
billion, achieved in 2007, Vanguard said in a statement on
Investors and financial advisers have favored low-priced,
passively managed index funds in 2012, playing to Vanguard's
historic strengths. The trend has also benefited BlackRock Inc's
iShares ETF unit, while hurting more traditional
managers like American Funds, Dodge & Cox and Janus Capital
Vanguard's success is also due to its efforts to offer more
products catering to self-directed retail investors,
particularly ETFs, said Avi Nachmany, research director of
Strategic Insight in New York.
"In the last few years, Vanguard has established a broader
footprint," he said. "They have become a participant in
virtually every part of the investment landscape."
Inflows remain "strong" in December, Vanguard spokesman John
Woerth said. He declined to give a dollar total for the month.
Contrary to much of the fund industry, Vanguard said the
majority of the flows, $72.3 billion, went into stock funds.
Another $54.4 billion went to bond funds and $6.3 billion into
"Investors have flocked to low-cost index funds when
investing in equities and we can see Vanguard provided both,"
said Tom Roseen, head of research services at Lipper, a unit of
Thomson Reuters. Vanguard's actively managed stock funds
actually had net customer withdrawals, Roseen noted.
Customers withdrew a net $2.5 billion from money market
funds, Vanguard said. JPMorgan's 2008 record was fed largely by
investors seeking the safety of money market funds.
Vanguard might have had even greater customer inflows - at
least in the short term - if not for its decision to change
benchmark indexes for some of its largest ETFs. In October,
Vanguard said it was switching 22 funds away from benchmarks
provided by MSCI Inc to cut costs.
As a result of the change, some institutional investors that
were required to use funds tracking MSCI benchmarks had to
switch to competitors, said Dave Nadig, director of research at
ETF information firm IndexUniverse.
For example, investors pulled a net $900 million in November
from the Vanguard MSCI Emerging Markets ETF, which is
shifting to an index created by FTSE Group, while adding $2.3
billion to BlackRock's iShares MSCI Emerging Markets Index
, according to data from Morningstar.
"The switch definitely slowed down or reversed their ETF
flows in those products," Nadig said. Still, setting a new
inflow record "is an enormous achievement and a vindication of
Vanguard's core value proposition," he said.
Vanguard, based in Valley Forge, Pennsylvania, had total
assets under management of $1.95 trillion at the end of November
and is the largest U.S. mutual fund manager and third-largest