Investors Are Fleeing These 3 Funds, but Should They?
Weak relative performance has spurred outflows.
The stock market has risen sharply during the past five years. That trend gradually caused the torrent of outflows from equity funds--spurred by the brutal October 2007-March 2009 bear market--to ease and eventually turn into net inflows. However, some stock funds still suffer from hefty redemptions. Let's take a closer look at three equity funds that have lost a great deal of assets both on an absolute basis and as a percentage of assets thus far in 2014 after posting poor performance. Are they still worthy holdings?
Thornburg International Value (TGVAX)
2014 outflows: $6.9 billion
Investors poured money into this fund during a hot streak; it beat its typical peer in every calendar year from 2000 to 2010, a period encompassing a wide variety of market environments. But the fund has since gone into a major funk, trailing more than 60% of peers in 2011, 2012, and 2013, as well as more than 90% of rivals in 2014 through July 14. For the trailing five years through that date, the fund lags nearly 90% of its peers. (It resided in the foreign large-blend Morningstar Category until moving to foreign large-growth in 2011.) Redemptions have accordingly snowballed: A net $900 million went out the door in 2012, followed by $3.6 billion in 2013 and nearly $7 billion in the first half of 2014. (The latter figure represented one quarter of the fund's assets at the start of this year.)
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.