FundFlows Insight Summary: Investors Redeem a Net $31.3 Billion From Conventional Funds for April

The U.S. economic picture remained difficult to assess during the first half of April, with many of the headline numbers showing improvements but missing analyst expectations. However, as the month progressed, ignoring the ugly 14.5% decline in March new-home sales, investors cheered better-than-expected March retail sales, a rise in industrial production, and an unexpected gain in March durable goods orders, which set the stage for another round of net inflows for long-term assets.

REUTERS/Steve Dipaola

Nevertheless, for the second month in three investors were net redeemers of fund assets, withdrawing $31.3 billion from the conventional funds business (excluding ETFs) for April. However, the headline number was misleading. Once again, money market funds suffered the only net redemptions of the super-groups—to the tune of $57.8 billion—for their fourth consecutive month of net outflows. For the fourth month in a row mutual fund investors were net purchasers of fixed income funds, injecting a net $9.2 billion, and for the sixteenth consecutive month investors remained net purchasers of stock & mixed-asset funds, depositing a net $17.4 billion for April.

United States Diversified Equity (USDE) Funds suffered net redemptions for April (-$0.6 billion) for the first month in 12. For the first month in five the USDE 4×3-matrix subgroup experienced net outflows (-$0.5 billion). With investors taking a risk-off stance with tech, biotech, and growth issues, it wasn’t all that surprising to see Lipper’s Large-Cap Growth Funds classification (-$1.9 billion) handing back the largest sum of all the 4×3-matrix fund classifications; growth funds (-$4.5 billion) suffered the only net redemptions of the valuation breakouts for the month.

While investors were concerned over slowing growth in China and the conflict in Ukraine, their interest in world equity funds remained steadfast in April. For the sixteenth consecutive month investors padded the coffers of World Equity Funds, injecting $4.7 billion net for April (the macro-classification’s smallest net inflows in the 16 months).

For the fourth month in a row investors were net purchasers of fixed income funds for April, injecting a net $9.2 billion into the group. On the taxable bond (nonmoney market) funds side (+$8.0 billion) 15 of Lipper’s 28 classifications witnessed net inflows, while on the tax-exempt side (+$1.3 billion) only 6 of the 20 classifications in the municipal bond funds universe saw net inflows. With the tax-filing deadline occurring during the month and with market tensions easing a bit toward month end, mutual fund investors were net redeemers of money market funds for April, withdrawing a net $57.8 billion—for the group’s fourth consecutive month of redemptions and its largest since March 2012.

In a response to retail investors’ moderate flight to safety at the beginning of the month, authorized participants (APs) in April increased their exposure to bond ETFs as rising-interest-rate fears declined, injecting a net $3.4 billion, while injecting $17.6 billion into stock & mixed-equity ETFs. The ETF universe witnessed its third consecutive month of net inflows, taking in a net $21.0 billion for April.

The USDE ETFs macro-classification (+$5.9 billion) posted its second consecutive month of net inflows in April. However, for the first month in three Lipper’s broad 4×3-matrix group suffered net redemptions, handing back just shy of $0.7 billion for the month. Large-cap ETFs (-$1.6 billion) witnessed the largest net outflows of the capitalization groups, with Large-Cap Growth ETFs (-$3.6 billion) suffering the largest net redemptions of the classifications in the subgroup. Outside the 4×3-matrix classifications S&P 500 Index ETFs took in the largest sum of net new money, attracting just a little under $5.6 billion.

Despite geopolitical concerns, APs remained engaged with world equity ETFs. Lipper’s World Equity ETFs macro-classification (+$8.2 billion) witnessed its third consecutive month of net inflows and its largest since October 2013. APs padded the coffers of all three major subgroups, injecting net new money into global diversified equity ETFs (+$198 million), international diversified equity ETFs (+$2.0 billion), and $6.0 billion into the country- or regional-focused world equity classifications.

For the third month in four bond ETFs (+$3.4 billion) witnessed net inflows. On the taxable bond ETFs side (+$3.2 billion) 19 of the 27 Lipper classifications attracted net new money for the month, while the tax-exempt offerings (+$281 million net) reported net inflows in all 7 classifications.

If you’d like to read the entire April 2014 FundFlows Insight Report with all its tables and charts, please click here.