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Retreat From U.S.-Stock Fund Managers Accelerates – WSJ – WSJ

Friday, November 14th, 2014

Retreat From US-Stock Fund Managers http://online.wsj.com/articles/retreat-from-u-s-stock-fund-managers-accelerates-1415048462
Instead money into US large-cap indexes. Int’l & small-cap managers still popular

QT:{{"

Yes, investors are still sinking money into U.S. stocks. But
increasingly they are doing it through traditional index mutual funds
and exchange-traded funds that track a specific market benchmark or
sector, without the variability of a fund manager’s hand. While active
stock funds have been seeing uninterrupted outflows, passive
U.S.-stock funds have collected inflows for eight months in a row.

Meanwhile, other broad categories are booming, too. Investors are
piling into bond funds and both active and index international-stock
funds.


“Active management has never been in worse repute,” says John
Rekenthaler, vice president of research at Morningstar. “This is the
darkest of days.”

Investors are sour on active U.S.-stock managers for good reason:
performance, or the lack of it, particularly during the 2008-09 U.S.
market slide.

Big institutional investors, meanwhile, determined long ago that
managers’ inconsistent results don’t justify their higher fees, and
pledged allegiance to lower-cost indexing.

In addition, many investors have flocked to bond funds and given
investment dollars to international stock-fund managers who, unlike
U.S.-stock managers, haven’t broken their trust.

Actively run international-stock funds, particularly small-cap stock
portfolios, have been relatively more successful at adding value over
an index than their U.S.-stock peers.

According to S&P Dow Jones Indices, 30% of international stock-fund
managers topped their benchmark in the five years through June, while
32% of emerging-market managers and 54% of international small-cap
managers did so.
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