January 4, 2019

Lipper Chart of the Week: Upheaval in the Fourth Quarter Changes the Fund Flows Picture for 2018

by Patrick Keon.

Lipper’s fund asset groups (including both mutual funds and ETFs) took in $217.1 billion in net new money in 2018. This represents a significant decrease (-59.1%) from the total positive net inflow of $531.4 billion in 2017. The net inflow for 2018 was driven by money market funds (+$188.9 billion), with taxable bond funds (+$22.0 billion) and equity funds (+$7.2 billion) also contributing to the positive net flows. After recording positive net inflows of $25.4 billion for 2017, the municipal bond fund asset group saw $1.0 billion leave its coffers in 2018. While taxable bond funds and equity funds did record increases for the year, the group’s totals for 2018 were each down more than 90% from the 2017 results. The only fund asset group to improve on its annual net inflows result from 2017 was the money market funds group, which saw its annual net positive flows grow by more than 167%.

The fund flows landscape for 2018 was turned upside down in Q4, triggered by uncertainty in the equity and bond markets. For the first time in history, the NASDAQ Composite Index, S&P 500 Index, and Dow Jones Industrial Average all finished the year in the red—despite all closing the third quarter with year-to-date increases—because of dismal performances in Q4. For the fourth quarter the NASDAQ, S&P 500, and Dow Jones lost 17.54%, 13.97%, and 11.83%, respectively. During the quarter investors pulled their money out of equity funds and taxable bond funds and sought the safety of money market funds. Money market funds took in more than $192 billion in net assets during the quarter, their largest quarterly intake since the global financial crisis when the group had positive net flows of $424.5 billion for Q4 2008. Conversely, equity funds experienced net outflows of $56.8 billion during the quarter, the group’s worst quarterly result since Q3 2011. It was a similar story for the taxable bond funds group (-$106.0 billion), which experienced its largest quarterly net outflow ever. A handful of issues contributed to the uncertainty faced by the markets in Q4, including speculation about a potential slowdown in U.S. expansion, global growth concerns, U.S./China trade tensions, and the Federal Reserve’s views and actions on interest rates, inflation, and the economy.





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