Lipper FundFlows Insight Summary: Fund Investors Continue to Purchase Long-Term Assets in February

Despite strong market returns in February, for the first month in eight investors were redeemers of fund assets, pulling out a mere $1.8 billion net from the conventional funds business (excluding ETFs) for February. The headline numbers, however, were misleading. Money market funds suffered the only net redemptions of the super-group—to the tune of $50.3 billion, for its largest net redemptions since March 2013. For the second consecutive month mutual fund investors were net purchasers of fixed income funds, injecting a net $11.1 billion, and for the fourteenth consecutive month investors remained net purchasers of stock & mixed-asset funds, depositing a net $37.4 billion.

REUTERS/Kham

Rebounding from its January slide, the S&P 500 closed at another record high toward the end of February, and despite  late-day pressure on February 28 because of rising geopolitical concerns in Ukraine, the index produced a February return of 4.31%—its second strongest return in seven months. Investors appeared to cheer the better-than-expected earnings reports and stock buybacks during the month. Despite strong equity market returns in February, mixed economic news, debt-ceiling concerns, and turmoil in Ukraine pushed Treasury prices around during the month; the  ten-year Treasury yield declined just 1 basis point (bp) to 2.66% for February.

USDE Funds attracted net inflows for February (+$7.6 billion) for a tenth consecutive month. For the third consecutive month the USDE 4×3-matrix subgroup experienced net inflows (+$7.5 billion), with multi-cap funds, attracting net inflows for a third month in a row, having the strongest net inflows (+$5.0 billion) of the capitalization breakouts.

Amid speculation that the People’s Bank of China was intervening to bring down the value of its currency and on news that Russia was sending troops to the Crimea region of the sovereign nation of Ukraine after civil unrest in Kiev forced its president to flee the nation, investors began to prefer developed markets over emerging markets. But good economic news out of the Eurozone encouraged investors to continue to pad the coffers of World Equity Funds for February; they injected a net $10.0 billion, for the macro-classification’s fourteenth consecutive month of net inflows.

As a result of increased geopolitical uncertainty in Ukraine, commodities prices rose for February, with near-month crude oil prices rising 5.23% and gold gaining 6.56%. In addition, M&A activity was a positive catalyst during the month, with Facebook’s purchase of privately held WhatsApp for $19 billion being the talk of the town. The Sector Equity Funds macro-classification attracted $3.4 billion for February—for a second consecutive month of net inflows.

For the second month in a row investors were net purchasers of fixed income funds for February, injecting a net $11.1 billion into the group—for their largest net inflows since April 2013. On the taxable bond (nonmoney market) funds side (+$9.4 billion) 16 of Lipper’s 28 classifications witnessed net inflows, while on the tax-exempt side (+$1.7 million) only 8 of the 20 classifications in the municipal bond funds universe saw net inflows. Despite increased uncertainty at month-end, mutual fund investors were net redeemers of money market funds for February, withdrawing a net $50.3 billion—for the group’s second consecutive monthly redemptions and the largest since March 2013.

If you’d like to read the entire February 2014 FundFlows Insight Report with all its tables and charts (including a section on ETFs), please click here.