Despite poor performance in January, retail investors padded the coffers of long-term mutual funds.
A drop in wages, slumping oil prices, and terror fears set the stage for a volatile month for the markets in January. Despite a fairly strong labor report at the beginning of the month, investors initially focused on the drop in hourly wages, which to some suggested the economy was not starting to accelerate as many had earlier imagined. Some pundits felt the deceleration in wage growth could cause the Federal Reserve to postpone raising interest rates in June or possibly even later this year. Reports of a dual hostage crisis in France accompanied by a continued decline in oil prices placed a pall over the markets. Investors reeled on learning the Swiss National Bank had decoupled the Swiss franc from the euro, further stoking fears of global deflation and perhaps showing a lack of confidence in the euro.
REUTERS/Thomas Hodel
For the first month in nine investors were net redeemers of fund assets, withdrawing $6.3 billion from the conventional funds business (excluding ETFs) for January. Money market funds, handing back some $41.0 billion for January, witnessed the only net redemptions of the broad asset classes. Returning to their winning ways, stock & mixed-asset funds experienced net inflows, taking in $24.5 billion for January (their largest net inflows since February 2014). For the second month in three mutual fund investors were net purchasers of fixed income funds, adding $10.2 billion to the macro-group for January. The benefits of end-of-year funding of qualified plans appeared to favor the conventional funds business once again this year.
USDE Funds witnessed net inflows for the first month in ten, but they took in just $0.2 billion for January. The slide in oil prices and concerns that the rising dollar might hurt U.S. exporters weighed on Large-Cap Growth Funds (-$4.8 billion net), which once again handed back the largest sum of all the 4×3-matrix classifications. Returning to its winning ways and benefitting from investors’ funding their qualified plans, Mixed-Asset Funds experienced net inflows for January, taking in $12.7 billion for the largest monthly net inflows since January 2013.
In contrast to their open-end brethren, for the first month in 12 authorized participants (APs) were net redeemers of equity ETFs, withdrawing a net $10.1 billion, while for the fourth month in a row they padded the coffers of bond ETFs—to the tune of $8.0 billion. The ETF universe witnessed its first month of net outflows in 12, handing back some $2.1 billion for January. Continued concerns about global growth and a possibility of waning U.S. exports weighed on APs’ appetite for U.S. Diversified Equity (USDE) ETFs during the month, with the macro-classification (-$20.3 billion) suffering the only net redemptions of Lipper’s five equity related macro-classifications. Sector Equity ETFs (+$5.7 billion) and World Equity ETFs (+$3.9 billion) witnessing the largest net inflows of the broad-based groups, followed at a distance by Mixed-Asset ETFs (+$308 million) and Alternatives ETFs (+$279 million).
If you’d like to read the entire January 2015 FundFlows Insight Report with all its tables and charts, please click here.
