May 31, 2019

Investors Remain Captivated by Municipal Debt Funds in 2019

by Tom Roseen.

Fund investors remained cautious for the fund-flows week ended May 29, 2019, as they lamented a protracted U.S./China trade standoff and concentrated on its possible impact on global growth. Money market funds took in net new money for the sixth week running, with investors padding their coffers to the tune of $17.5 billion for the most recent fund-flows week. This brings their year-to-date inflows total to $88.8 billion. Meanwhile, municipal bond funds witnessed their twenty-first consecutive week of net inflows—taking in $919 million this past week—bringing their year-to-date total to $37.7 billion. In contrast, equity funds (including ETFs) have handed back some $44.4 billion year to date, while taxable bond funds have attracted $109.9 billion.

The average municipal debt fund returned 4.02% year to date through the fund-flows week ended May 29, 2019, while the average taxable fixed income fund returned 4.49% for the same period. Estimated net flows into the municipal debt funds macro-group of $37.7 billion for the first five months of the year (note that this total is not including funds which report total net assets on a monthly basis, which have yet to report flows for May) handsomely outpaced any other first five months of any given year going back to 1992, when Lipper began calculating weekly fund flows.

Lipper’s Intermediate Municipal Debt Funds classification (+$12.2 billion) attracted the largest share of net new money year to date, followed by the General & Insured Municipal Debt Funds classification (+$10.7 billion) and High Yield Municipal Debt Funds classification (+$8.3 billion). Short Municipal Debt Funds (-$1.5 billion) and Other States Short/Intermediate Municipal Debt Funds (-$25 million) witnessed the only net redemptions of Lipper’s 20 classifications in the municipal debt fund universe.

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