Mutual Funds

BlackRock's US-based active funds post record 2016 withdrawals: Morningstar

Scott Mlyn | CNBC

Investors pulled $19.3 billion from BlackRock's U.S.-based actively managed mutual funds in 2016, Morningstar estimates showed on Tuesday, a record high as the investment industry struggles to restrain an exodus to lower-cost investments.

The funds posted nearly $8.5 billion in outflows during the fourth quarter, the research service said.

An industry bellwether, New York-based BlackRock also owns one of the most prized businesses in asset management, its iShares exchange-traded funds franchise.

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That business has profited from investor's shift from active to passive funds. Many ETFs are relatively low cost and aim merely to track the market, not to beat it.

U.S.-based actively managed stock funds suffered $288 billion in withdrawals in 2016 through November, the largest on record, according to Thomson Reuters Lipper service. The figure tops outflows of $139 billion in 2015 and $218 billion in 2008.

On the passive side, stock index mutual funds and equity exchange-traded funds each attracted about the same amount of new cash, more than $112 billion apiece in 2016, Lipper said.

Earlier Tuesday, the world's largest asset manager said it took in $140 billion into its ETF business overall during 2016, a new global record and larger than its rivals.

Some index-tracking ETFs charge as little as $3 annually for every $10,000 they manage, while the average charged by U.S. stock mutual fund managers is $131, according to data for 2015 from the Investment Company Institute trade group.

The active fund withdrawals come as BlackRock has been working to boost the investment performance of its stockpicking managers by introducing more data mining and rules-based investment techniques to its traditionalist teams, which it calls "Fundamental Active Equity."

Performance showed signs of improvement in November, with the percentage of BlackRock funds holding the top Morningstar star ratings over three years increasing to 64 percent, up from 51 percent in October and compared to a 33 percent industry average, according to Credit Suisse.

BlackRock is slated to report its fourth quarter and full-year results on Jan. 13. The company did not respond to a request for comment.