FUND FLOWS SPOTLIGHT Equity Investors Head Abroad After the presidential election, U.S. equity inflows spiked in November. The trend is now the other way. After five encouraging months and a so-so April, the U.S. equity group slid into significant net outflows in May, with total redemptions of U.S. Equity $3.1 billion. Meanwhile, international-equity funds saw net inflows of $35.7 billion, coming in a close second to taxable-bond funds' $36.9 billion. The majority of international-equity flows went to passive funds, though flows into active strategies were also positive (in contrast with U.S. equity, for which active flows were strongly negative). Alina Lamy is a senior analyst in Morningstar's quantitative research group. Estimated Net Flows 60 USD Bil International Equity 45 30 15 0 -15 - 30 01/2014 06/2014 01/2015 06/2015 01/2016 06/2016 01/2017 Source: Morningstar. Data as of 05/31/2017. Active Versus Passive Fund Strategies The percentage of U.S. actively managed funds that outperformed their respective Morningstar Style Index. 19.5 59.5% 15.3 54.1% 17.7 75.0% 18.7 54.7% 20.6 69.3% 21.3 Core Growth 7.3 1.5% 11.3 23.0% 10.6 15.8% 8.6 14.6% 8.1 37.7% 7.5 41.6% 6.0 31.5% 7.0 48.8% 7.1 Value Core Growth 62.5% 12.5 2.7% 16.1 29.3% 15.0 0.0% 17.2 12.4% 14.9 31.3% 13.4 42.3% 13.6 30.2% 14.2 57.1% 13.3 Value Core Large 32.4% 29.8% Mid 20.2 Large 46.7% Mid 21.9 Small 14.3% Large 13.4 5-Year Mid 3-Year 74.5% Value Index Returns (06/30/2017) Small 1-Year p < 20% p 20 to 40% p > 40% Small Percentage of Actively Managed Funds Outperforming Index: Growth global.morningstar.com/Morningstarmagazine 79http://global.morningstar.com/Morningstarmagazine