As investors turned their attention in November to the uncertainties of the presidential election, the looming “fiscal cliff,” and the continued financial trials and tribulations in Europe, equity began to stumble. As a result fund investors became more tentative in their purchasing behavior, focusing their attention to the government gridlock and bickering over the fiscal crisis, the probable changes in tax laws, and the recurring drama of the European debt crisis. Succumbing to the pressures of uncertainty, investors pushed down Treasury yields, and prices were up slightly on increased concerns that policymakers would not find common ground to avoid the fiscal cliff.
Nonetheless, mutual fund investors were net purchasers of fund assets for November, padding the coffers of bond funds and money market funds (+$25.7 billion and +$69.6 billion, respectively). As might be expected given the political rollercoaster ride, conventional fund investors redeemed assets from stock & mixed-asset funds, withdrawing a net $14.1 billion. Conventional domestic equity funds continued to get roiled. The U.S. Diversified Equity Funds macro-group experienced its nineteenth consecutive month of net redemptions (-$14.4 billion), with large-cap funds (-$11.5 billion) dragging down the group for the forty-second consecutive month.
As has been the case for most of 2012, ETF investors took a different path than their conventional fund brethren. Exchange-traded funds (ETFs) posted their twelfth consecutive month of net inflows at $13.8 billion, with $4.8 billion in net sales for fixed income offerings. Stock & mixed-asset ETFs reported net inflows of $9.0 billion as world equity products continued to garner the most attention, but the turnaround in U.S. diversified equity (USDE) ETFs (+$1.6 billion) proved the biggest shift from October. Bond ETFs reported their twenty-third consecutive month of inflows at $4.8 billion as investors moved away from risk in favor of added exposure to U.S. Treasury and other investment-grade products.
For a deeper dive into the monthly fund flows trends for both conventional mutual funds and ETFs, read our monthly FundFlows Insight Report here.
