By Tim McLaughlin
BOSTON (Reuters) - Vanguard Group Chief Executive William McNabb on Tuesday said the No. 1 U.S. mutual fund company had accumulated $40 billion in net assets during the first half of the year from the funds that switched away from benchmarks provided by MSCI Inc
"If you take those 22 funds, $40 billion has been accumulated during the first half of 2013," McNabb told Reuters. "We think people are accepting the change. It hasn't been the drag that a lot of people predicted it would be."
He also said the net new assets from the funds that made the benchmark switch accounted for a slightly higher percentage of cash flows from the year-ago period.
Vanguard announced the benchmark switch last October as other managers of index funds, such as BlackRock Inc
Last fall, Vanguard said it would shift six international stock funds with $170 billion of assets to track indexes from the FTSE Group, including its giant Vanguard Emerging Markets Index ETF. And 16 U.S. stock and balanced funds with $367 billion of assets, including the Vanguard Total Stock Market ETF, switched to indexes developed by the University of Chicago's Center for Research in Security Prices.
The change affected both mutual funds and exchange-traded funds. Vanguard, based in Valley Forge, Pennsylvania, manages more than $2.2 trillion in mutual fund assets.
Meanwhile, in June, investors pulled $9.7 billion from Vanguard bond funds and another $400 million from balanced funds. That $10.1 billion of outflows outpaced the $10 billion that went into stock and money market funds, leaving Vanguard with a rare episode of outflows - albeit only $100 million, Vanguard spokeswoman Katie Henderson said.
Henderson said Vanguard's last previous outflow happened in December 1994. But on a different basis, Lipper Inc, a unit of Thomson Reuters, said Vanguard had an outflow figure in August 2008.
McNabb said the company's strident warnings to investors about bond risks have played a part in slowing down the money going into those investments.
"Money has left, but at a less frantic pace," McNabb said. "People have certainly reacted to changes in the bond market. Money is moving from bonds into money funds with basically no yield."
(Reporting by Tim McLaughlin, editing by G Crosse, Bernard Orr)