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Mutual funds, ETFs see largest monthly outflow since 2008 in December

U.S. mutual fund and exchange-traded funds had an estimated $83 billion in net outflows in December, the largest monthly number since the financial crisis, Morningstar said in an asset flows commentary.

That month of record outflows — $103 billion — took place in October 2008, the commentary said, noting that last month's net outflows were much less egregious since they accounted for far smaller percentage of total assets: 0.46% vs. 1.43% in October 2008.

Net outflows in December spanned most asset classes, with taxable bonds faring the worst with $43 billion in estimated net outflows, followed by sector equities with $17.9 billion, allocation funds at $16.5 billion, international equities at $13.1 billion and alternatives, $7.7 billion.

Money market funds had an impressive December with $57.3 billion in estimated net inflows, finishing up the best year since 2008 at a total $162 billion in net inflows for 2018. Money market fund net inflows totaled $594 billion in 2008.

Among other asset classes, U.S. equities fared well in December with estimated net inflows of $14.1 billion. Also with estimated net inflows last month were commodities and municipal bonds with $812 million and $191 million, respectively.

Despite the S&P 500 falling 9% in December, much of what resulted in net inflows for U.S. equities were passive funds, which had estimated net inflows of $45.6 billion in December. Vanguard Group's Total Stock Market Index fund alone collected $14.1 billion in net inflows for the month, Morningstar said.

"It's possible that flows were so strong because of the December sell-off — not in spite of it, as target-date and other model-driven portfolios rebalanced to increase their U.S. equity allocations," the commentary said.

Active U.S. equity funds, meanwhile, had estimated net outflows of $31.5 billion in December.