R12| Monday, October 7, 2019 THE WALL STREET JOURNAL.
competition to the mutual-fund market and are
“forcing active managers at mutual funds to
prove their merit,” says Ryan Shugrue, director
of wealth-management research at Janney
Montgomery Scott, a Philadelphia financial firm
that manages more than $85 billion. “Those
that are able to offer long-term outperformance
in excess of their fees will likely survive.”Large-cap ETFs show worth
If any one mutual-fund category is most at
risk it would probably be actively managed
funds focused on U.S. large-cap stocks, especially
U.S. large-cap growth stocks, says Morningstar’s
Mr. Johnson. Money has been flowing out of
these funds as the category has suffered pro-
longed and pronounced underperformance ver-
sus funds that simply track a large-cap index.
And while mutual funds are far from death,
the pressure on them is likely to increase as
baby boomers age and spend down their assets
in retirement, says Matthew C. Lui, of Canter-
bury Consulting, an investment advisory firm
based in Newport Beach, Calif., that oversees
about $20 billion in assets. That generation,
which now ranges from about 55 to 75 years
old, is more invested than younger generations
in mutual funds, he says. Even so, Mr. Lui adds,
the spend-down will likely take a long time.Mr. Ravois a writer in Seattle. He can be
reached [email protected].O
ver the past decade, many ex-
perts have predicted that the
open-end mutual-fund industry
would crumble, an inevitable
victim of exchange-traded
funds. No less an authority
thanMorningstarInc. two years ago dubbed
mutual funds’ projected slide in assets under
management as “flowmaggedon.”
Not so fast. Mutual funds in the U.S. remain
a monolithic presence: They had $19.93 trillion
in assets under management as of Aug. 31, ver-
sus $19.49 trillion a year earlier, suggesting
that any shrinkage will come glacially.
In fact, more mutual funds were launched
last year (345) than ETFs (247), according to
the Investment Company Institute, a fund-ad-JOURNAL REPORT | INVESTING IN FUNDS & ETFS
vocacy group. And mutual-fund cash flows
were a positive $10.4 billion through the first
half of this year, versus a negative $30.1 billion
in the 2018 first half, though the market’s tu-
mult in August turned that flow negative.
Even Morningstar has turned off the siren.
“A very large contingent of investors is still
very well served by mutual funds,” says Ben
Johnson, its director of global ETF research.Retirement-plan connection
Of course, this doesn’t take anything away
from ETFs’ rapid growth, from zero assets in
1992 to $3.94 trillion as of Aug. 31, and their
advantages, such as market-based trading, bet-
ter transparency and typically lower-expense
ratios. But it does raise the question as to why
mutual funds have managed to hold on to such
a large share of the market.The Buzz
Vs. the Beast
Exchange-traded funds get all the attention, but mutual
funds are still getting much of the money. Here’s why.
BYNICKRAVOALEX NABAUMThe almost singular answer seems
to be employer-sponsored retirement
plans—80% of the 56 million house-
holds who own mutual funds buy
them through these plans, according
to the Investment Company Institute.
Indeed, many, if not most, employer-
sponsored plans offer only mutual
funds in their lineup of investment op-
tions. That means even if participants
wantto invest in ETFs, they can’t
through the plan.
Additionally, there are far more
mutual funds available to investors
than ETFs. As of August, there were
8,009 U.S. mutual funds trading do-
mestically, says the Investment Com-
pany Institute, versus 2,053 ETFs.
When it comes to individuals who
invest outside of retirement portfolios,
the attraction to mutual funds often
comes from inertia or convenience,
says Stuart Michelson, a finance pro-
fessor at Stetson University in DeLand,
Fla. Mutual funds, he says, are a well-
known product, while ETFs, to many
individuals, are considered new and
require education. “For most individu-
als, selecting stock funds versus bond
funds versus target-date funds is a
daunting decision by itself,” says Dr. Michelson.
As for the debate over whether mutual funds
or ETFs are the best investment choice—as well
as the tug of war between active and passive
investing styles—the right answer isn’t as clear-
cut as some believe. Every fund and ETF is dif-
ferent, as are investor goals and time frames.
Moreover, the difference between mutual funds
and ETFs may become blurred later this year
with the advent of less-transparent ETFs that
operate more like mutual funds in that they
won’t disclose their holdings daily.
What is clear is that mutual funds and ETFs
both have advantages and drawbacks. ETFs are
often simple, passively managed index funds,
though some are double- or triple-leveraged or
perform inversely, to some degree, from an un-
derlying instrument. Mutual funds offer the
same type of indexed investing options (al-
though their leverage is limited by law to 33%),
as well as a broad variety of passively and ac-
tively managed options.
The availability of automatic investment and
dividend reinvestment plans makes incremental
mutual-fund purchases less expensive than buy-
ing ETFs over time. Those who buy ETFs incre-
mentally incur commissions and transaction fees
with each purchase that can substantially reduce
gains, or increase losses, especially if an investor
is dollar-cost averaging, or buying the same dol-
lar amount of an investment on a regular basis.
That said, ETFs have brought some neededMutual funds’
demise has
likely been
overstated.
Perhaps their
dominance will
be challenged
over time.Mutualfunds* Exchange-tradedfunds†MutualFundsvs.ETFs
Totalnetassetsbytype,U.S.-registered
investmentcompaniesSource: Investment Company Institute* Excludes mutual funds that invest primarily in other mutual funds
† Excludes ETFs that invest primarily in other ETFs$200481216trillion’102009 ’12 ’14 ’16 ’18Largest Stock and Balanced Funds
Total returns are for periods ended Sept. 30. All data are final. Assets are through Aug. 31.
Performance data include both share prices and reinvested dividends.
Assets Performance (%)
Fund Name Symbol ($ billions) September 3rd-qtr 1-year 3-year* 5-year*
Vanguard TSM Idx;Adm VTSAX 813.49 1.7 1.1 2.9 12.8 10.4
Vanguard 500 Idx;Adm VFIAX 486.39 1.9 1.7 4.2 13.4 10.8
Vanguard Tot I S;Inv VGTSX 373.60 2.7 –1.6 –1.6 6.0 3.1
SPDR S&P 500 ETF SPY 262.24 1.9 1.7 4.2 13.3 10.7
Vanguard Instl Indx;InsP VIIIX 224.64 1.9 1.7 4.2 13.4 10.8
Fidelity 500 Index Fund FXAIX 202.58 1.9 1.7 4.2 13.4 10.8
American Funds Gro;A AGTHX 187.57 –0.3 –2.2 –2.3 12.8 10.6
iShares:Core S&P 500 IVV 181.90 1.9 1.7 4.2 13.4 10.8
American Funds EuPc;R6 RERGX 155.45 1.8 –1.6 1.1 7.4 5.0
American Funds Bal;A ABALX 148.62 0.9 1.5 5.1 8.8 7.6
American Funds Wash;A AWSHX 118.46 1.7 1.6 5.8 12.9 9.8
Fidelity Contrafund FCNTX 117.53 –1.5 –2.4 –1.3 14.9 11.6
Vanguard Dev Mkt;ETF VEA 111.15 3.1 –1.0 –2.0 6.3 3.6
American Funds Inc;A AMECX 109.78 1.5 1.8 5.4 7.2 6.1
Vanguard Wellington;Adm VWENX 106.14 1.6 3.2 8.7 10.1 8.2
Vanguard Md-Cp I;Adm VIMAX 103.47 2.1 0.6 3.7 10.7 9.2
American Funds CIB;A CAIBX 103.30 1.5 1.0 5.1 5.3 4.5
American Funds FInv;A ANCFX 98.87 1.3 –0.1 0.7 11.3 9.7
American Funds ICA;A AIVSX 95.02 1.1 –0.1 –0.5 9.5 8.1
American Funds CWGI;A CWGIX 94.32 1.5 –0.7 1.3 8.6 6.0
Vanguard Gro Idx;ETF VUG 91.82 0.2 2.0 4.5 15.4 12.2
Vanguard S-C Id;Adm VSMAX 89.26 1.4 –1.5 –3.8 9.6 8.6
American Funds NPer;A ANWPX 88.60 0.8 –0.5 2.6 12.1 9.4
Vanguard EM St I;ETF VWO 83.34 1.4 –3.6 1.4 5.3 2.0
Vanguard Val Idx;ETF VTV 79.59 3.4 1.1 3.6 11.5 9.3
Franklin Cust:Inc;A1 FKINX 73.74 1.3 0.4 4.5 6.1 3.8
Invesco QQQ Trust 1 QQQ 73.40 0.8 1.2 2.6 17.8 14.9
Vanguard Ext MI;Adm VEXAX 68.85 1.0 –1.6 –3.8 10.0 8.5
Vanguard RE Idx;ETF VNQ 67.85 1.9 7.4 19.9 7.1 9.9
Dodge & Cox Stock DODGX 67.63 2.9 –0.2 –2.4 11.2 8.0
American Funds AMCP;A AMCPX 65.78 –0.3 –2.1 –2.7 11.5 9.1
T Rowe Price BC Gro TRBCX 64.17 –1.3 –1.6 2.0 18.2 14.2
iShares:Core MSCI EAFE IEFA 63.19 2.9 –0.9 –1.8 6.6 3.8
Vanguard PRIMECAP;Adm VPMAX 62.88 1.4 0.8 –2.3 14.1 11.7
American Funds Mut;A AMRMX 58.01 2.0 2.5 6.0 11.0 9.2
iShares:MSCI EAFE ETF EFA 57.52 2.9 –1.1 –1.4 6.4 3.2
Vanguard Wellesley;Adm VWIAX 57.48 0.6 2.8 10.6 6.7 6.5
T Rowe Price Gro Stk PRGFX 54.16 –1.0 –1.2 2.1 16.3 13.0
iShares:Core MSCI EmMkts IEMG 53.02 1.9 –4.3 –2.4 5.5 2.1
First Eagle:Global;I SGIIX 49.25 1.9 1.0 5.4 6.2 5.8
iShares:Core S&P Md-Cp IJH 48.19 3.1 –0.1 –2.6 9.3 8.8
MFS Value;I MEIIX 47.77 2.5 2.5 7.4 10.4 9.1
Fidelity Total Market Ix FSKAX 46.50 1.7 1.2 2.8 12.8 10.4
Vanguard Div A I;ETF VIG 46.47 1.3 4.2 10.1 14.8 11.5
Dodge & Cox Intl Stock DODFX 46.20 4.4 –1.7 –2.8 5.3 0.6
iShares:Russ 1000 Gr ETF IWF 45.08 -0.01 1.4 3.5 16.7 13.2
Vanguard Windsor II;Adm VWNAX 44.37 3.1 1.6 1.7 10.1 7.5
American Funds SMCP;A SMCWX 44.24 –0.8 –2.1 –1.4 9.6 8.5
Vanguard Tgt Ret2025;Inv VTTVX 43.65 1.1 1.1 4.9 7.8 6.4
Vanguard Health Care;Adm VGHAX 43.32 –0.6 –1.5 –6.5 6.2 7.2
SPDR Gold GLD 43.15 –2.9 5.3 24.6 3.5 3.7
iShares:Core S&P Sm-Cp IJR 43.09 3.3 –0.2 –9.4 9.3 9.9
Fidelity Gro Company FDGRX 42.96 –1.7 –1.3 –4.5 17.1 14.0
Vanguard Bal Idx;Adm VBIAX 42.37 0.8 1.7 6.3 9.0 7.8
Invsc Oppen Dev Mkt;Y ODVYX 40.40 0.7 –3.8 2.5 7.9 2.7
iShares:Russ 2000 ETF IWM 40.07 2.1 –2.4 –9.0 8.2 8.2
American Funds NWld;A NEWFX 39.78 1.7 –0.9 7.4 9.2 5.1
Vanguard Ins T StMk;Ins+ VITPX 38.66 1.7 1.1 2.9 12.9 10.5
Schwab Cap:S&P 500 Idx SWPPX 38.66 1.9 1.7 4.2 13.3 10.8
Vanguard Div Gro;Inv VDIGX 38.65 0.2 3.5 14.0 14.8 11.8
Vanguard Tgt Ret2030;Inv VTHRX 38.52 1.3 0.9 4.2 8.3 6.7
iShares:Russ 1000 Vl ETF IWD 37.98 3.5 1.3 3.9 9.3 7.6
Vanguard FTSE xUS;ETF VEU 37.01 2.8 –1.5 –1.0 6.3 3.2
Vanguard Tgt Ret2035;Inv VTTHX 36.47 1.5 0.7 3.4 8.8 6.9
Vanguard Intl Gro;Adm VWILX 35.61 1.2 –3.0 –1.9 10.3 7.2
Note: For funds with multiple share classes, only the largest is shown *Annualized N.A.=Not applicable or not availableData provided by- Jim Cullen, Chairman & CEO
For further information, please contact Schafer Cullen Capital Management
212.644.1800 • [email protected] • schafer-cullen.comSchafer Cullen Capital Management is an independent investmentadvisor registered under the InvestmentAdvisers
Act of 1940. This information should not be used as the primary basis for any investment decision nor, should it be
construed as advice to meet a particular investment need. It should not be assumed that any security transaction,
holding or sector discussed has been or will be profitable, or that future recommendations or decisions we make
will be profitable or equal the investment performance discussed herein. A list of all recommendations made by
the Adviser in this strategy is available upon request for the 12 months prior to the date of this report.High Dividend Value Equity
Enhanced Equity Income
Value Equity
International High Dividend
Emerging Markets High Dividend
“Invest for the long term and
be disciplined about price.
The rest is noise.”