Fund assets grew by $1.5 trillion in 2012, an increase Strategic Insight attributes to continued net demand and favorable market decisions. Stock funds saw a 15% annual asset appreciation, and bond funds attracted $317 billion—an annual return of nearly 9%.
Tax-free funds netted $52 billion to give investors average returns of 8% for 2012. Monthly net inflows into taxable bond funds continued in December in the amount of $14 billion, while tax-free bond funds saw a reversal in demand with nearly $3 billion in monthly net redemptions.
U.S. equity fund assets grew to $4.3 trillion by year-end 2012 despite $90 billion of annual redemptions and 15% of total returns. International equity funds returned an average of 3% for the month of December and nearly 18% for the full year, but still saw investors withdraw approximately $4 billion in December. Non-U.S. funds attracted an aggregate of $23 billion for the full year.
Assets in target-date funds (TDFs) grew to $474 billion in 2012, assisted by 13% in average annual returns and $53 billion of annual net intake. Exchange-traded products (ETPs) attracted $39 billion of net intake in December, bringing year-to-date flows to $188 billion. International equity exchange-traded funds (ETFs) netted $14 billion of inflows during the month, while domestic equity attracted $25 billion and taxable bond ETFs saw $49 billion of annual net inflows. Globally, net flows for exchange-traded products exceeded $200 billion in 2012.
“Patient mutual fund investors were rewarded in 2012,” commented Avi Nachmany, Strategic Insight’s director of Research. “Demand for bond funds is expected to moderate in 2013 as investor post-recession numbness fades. Bond fund investors will increasingly realize that the cumulative 39% total returns of such funds over the past five years is irrelevant when planning for the coming five years.”