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August 10, 2018

For the Quarter to Date Fixed Income Funds Remain the Primary Attractor of Investor Assets

by Tom Roseen.

by Tom Roseen.

For the third consecutive week investors were net purchasers of overall fund assets (including those of conventional funds and ETFs), injecting $20.5 billion for Thomson Reuters Lipper’s fund-flows week ended August 8, 2018. But, despite continued strong corporate earnings and a fair nonfarm-payrolls  report during the week, fund investors were net redeemers of equity funds (-$962 million), while they padded the coffers of money market funds (+$16.6 billion), taxable bond funds (+$4.2 billion net), and municipal bond funds (+$623 million net).

For the quarter to date through the week ended Wednesday, August 8, investors have injected a net $5.0 billion into equity ETFs (+$19.6 billion) and equity mutual funds (-$14.6 billion). Investors have remained enamored of international equity funds (+0.99% return) for the quarter to date, injecting $3.7 billion net, followed by small-cap funds (+$3.2 billion, +2.90% return) and sector-technology funds (+$2.6 billion, +3.53% return).

Despite sporting the strongest QTD return of all the equity macro-groups, large-cap funds (+4.82% return) have witnessed the largest net redemptions, handing back some $5.3 billion, bettered by global equity funds (+3.01% return), which have witnessed net redemptions of $3.7 billion, and equity income funds (+4.17% return and -$790 million net).

Shrugging off the rising interest rates, investors have continued to pad the coffers of fixed income funds QTD, injecting $14.4 billion net into taxable fixed income mutual funds (+$5.7 billion) and ETFs (+$8.7 billion) and $29.7 billion net into money market funds.

Despite narrowing spreads and the Treasury yield curve shifting up in July, investors have injected $11.2 billion net into corporate investment-grade debt funds for the QTD, followed by government-Treasury funds (+$4.9 billion) and municipal bond funds (+$2.8 billion). At the opposite end of the spectrum flexible funds (-$3.0 billion), balanced funds (-$2.8 billion), and government-mortgage funds (-$735 million) have suffered the only net redemptions QTD of the fixed income fund macro-groups. From a performance perspective world taxable fixed income funds (+0.91%) have witnessed the strongest return QTD, followed by long-term taxable bond funds (+0.72%) and short-/intermediate-term municipal debt funds (+0.16%). Long-term municipal debt funds (+0.06%) have posted the lowest relative return of the fixed income macro-groups.

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