"There is a breath of hope for the others," the 1,000 or so mutual fund firms who aren't Vanguard [profile]. So notes Morningstar guru John Rekenthaler.

Bill McNabb Vanguard CEO

The hope that Rekenthaler sees is in the net flows numbers:

"For the first time in three years, Vanguard is not attracting more than 100% of the industry's inflows," Rekenthaler writes.

Vanguard brought in a whopping $116 billion in net inflows in Q1 2017, M* estimates (Vanguard says it was $121 billion). Yet from M*'s chart, it appears that "the rest of the U.S. fund industry" brought in nearly $100 billion in net inflows in the same quarter, compared to net non-Vanguard mutual fund outflows of more than $100 billion in 2016.

Rekenthaler digs a bit into where those flows are going, on both sides. For Vanguard, he concludes, "the company thrived across the board."

"Unlike other fund companies, Vanguard relies neither on a handful of star funds nor on a reputation for running one asset class," Rekenthaler writes. "Vanguard alone in the industry has built a true brand, and that brand extends all investment types."

Vanguard's top funds in Q1 in terms of net inflows were largely "core" funds, and Rekenthaler's take is that the "core-and-explore" concept has been great for building on and reinforcing Vanguard's strengths.

Among non-Vanguard fund firms, Rekenthaler notes, eight of the top ten inflow-winning funds in Q1 2017 were indexed ETFs, and the other two were active mutual funds. Funds from BlackRock's iShares [profile], Pimco [profile], SSgA [profile], and T. Rowe Price [profile], all of which are also giant shops, all made it into that list.

Overall, he writes, "the leading funds from a few major providers will gobble up most of the core inflows," while "investors purchase a very wide variety of explore funds."

"Those [explore] assets can sum to a substantial amount," Rekenthaler writes, "but they do not often cluster within a single fund."

Despite offering a ray of hope, though, Rekenthaler still concludes on a bleak note for fundsters who work for firms that aren't Vanguard. He describes himself as still "unable to foresee Vanguard's decline."

"The contest remains Vanguard's, for as far as the eye can see," Rekenthaler writes. 

Edited by: Neil Anderson, Managing Editor


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