January 18, 2019

Mutual Fund Investors Duck for Cover, While APs Keep the Pedal to the Metal in December

by Tom Roseen.

Photo Source: REUTERS/Jeenah Moon

For the third month in four, investors were net sellers of mutual fund assets, withdrawing $94.9 billion from the conventional funds business (excluding ETFs) for December. Investors shrugged off a Goldilocks November nonfarm payrolls report and focused on the implications of an imminent government shutdown, declining global growth, and uncertain U.S./China trade relations, pushing U.S. stocks deep into the red for the month. For the third month in a row, the fixed income funds macro-group witnessed net outflows, handing back $62.4 billion for the month. And for the eighth consecutive month, stock & mixed-asset funds witnessed net outflows (-$115.4 billion for December, their largest monthly net outflows since at least January 2008), while money market funds (+$63.1 billion, for their third consecutive month of inflows) witnessed the only net inflows of the three broad-based macro-groups in the open-end fund universe.

For the sixth month in a row, ETFs overall witnessed net inflows, taking in $50.1 billion for December—their largest monthly net inflows since January 2018. Authorized participants (APs, those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-asset ETFs, adding $35.2 billion to equity ETF coffers. And for the second consecutive month, they were net purchasers of bond ETFs—injecting $14.9 billion for December. APs were net purchasers of three of the five equity-based ETF macro-classifications: USDE ETFs (+$27.5 billion), World Equity ETFs (+$18.0 billion), and Mixed-Asset ETFs (+$609 million), while being net redeemers of Sector Equity ETFs (-$10.6 billion) and Alternatives ETFs (-$321 million). In this segment, I highlight the December fund-flows results for both types of investment vehicles.

Highlights:

  • For the third month in four, mutual fund investors were net redeemers of fund assets, withdrawing $94.9 billion from the conventional funds business for December.
  • For the third month running, fixed income funds (-$62.4 billion for December, their largest monthly net outflows since June 2013) witnessed net outflows, while for the eighth month in a row, investors were net redeemers of stock & mixed-asset funds (-$115.4 billion). Money market funds (+$63.1 billion) witnessed the only net inflows.
  • For the sixth month running, authorized participants (APs) were net purchasers of ETFs, injecting $50.1 billion for December. APs were net purchasers of stock & mixed-asset ETFs (+$35.2 billion) and fixed income ETFs (+$14.9 billion).
  • However, for the third month in a row, APs were net redeemers of Sector Equity ETFs (-$10.6 billion for December).

Click here to download the December 2018 FundFlows Insight Report: Mutual Fund Investors Duck for Cover, While APs Keep the Pedal to the Metal in December.

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