November proved to be another strong month for asset flows into liquid alternative mutual funds, as reported by Morningstar in their monthly U.S. Open-End Asset Flows Update for November 2013. Overall net inflows into mutual funds in November totaled $14.5 billion, with the alternatives category claiming $3.3 billion of that net positive flow. As noted by Morningstar, “alternative mutual funds have drawn a record $37.1 billion for the year to date, a 41% organic growth rate. The group has had inflows virtually every month over the past five years.” This is in sharp contrast to taxable and municipal bonds which lost a combined $12.8 billion in November. In addition, investors extracted $3.2 billion from commodity funds.
Within the alternatives category, nontraditional bond funds were the main draw. The category saw $3.1 billion of net new assets flow into its coffers with the Goldman Sachs Strategic Income Fund taking in the lions share at $1.2 billion. Flows for other segments of the alternatives category include $1.9 billion for long/short equity funds, $1.1 billion for multi-alternative, $283 million for market neutral and $155 million for managed futures. In the alternative income area, bank loan funds continued to be the big winner with $3.3 billion of positive flows in November.
The following chart shows monthly flows into, or out of, core and noncore mutual funds and ETFs through November 2013. Core funds include categories such as intermediate and long-term government and corporate bond funds. Noncore includes funds such as unconstrained and long/short bond funds, as well as bank loan funds. While noncore flows have been consistently strong for the past several years, flows into core bond funds took a drastic negative turn in May of this year when taper fears began to rise.
Source: Morningstar, December 13, 2013 Asset Flows Report