March 22, 2019

Investors Pad the Coffers of Municipal Bond Funds at the Beginning of 2019

by Tom Roseen.

Year-to-date, through the fund-flows week ended Wednesday, March 20, 2019, the Federal Reserve Board’s dovish stance appears to have encouraged U.S. investors to pad the coffers of fixed income funds once again. Taxable bond funds (including ETFs) and municipal bond funds have attracted $71.7 billion and $21.4 billion, respectively.

While the average equity mutual fund has experienced a stellar start to 2019—rising 13.65% year-to-date—equity funds have only attracted $5.9 billion for the same time period, with conventional equity mutual funds attracting $1.9 billion and equity ETFs taking in $4.0 billion. With investors focused on waning global growth and concerns about the China/U.S. trade talks, money market funds have drawn a net $15.8 billion year-to-date as some investors appear to be content just sitting on the sidelines for now.

Municipal bond funds have witnessed their strongest first quarter net inflows (+$21.4 billion) since 1992, when Lipper began tracking weekly flows, taking in money in each of the last 11 weeks. February net inflows of $10.5 billion were the strongest February inflows on record, and March net inflows (+$3.9 billion), so far, appear to be slightly above average.

Lipper’s Intermediate Municipal Debt Funds classification (+$7.8 billion) took in the largest amount of net new money of all of the municipal bond fund classifications year-to-date, followed by General & Insured Municipal Debt Funds (+$4.5 billion), High Yield Municipal Debt Funds (+$4.5 billion), and Short Municipal Debt Funds (+$1.9 billion). On the single state side of the universe, California Intermediate Debt Funds (+$880 million) and California Municipal Debt Funds (+$660 million) experienced the largest draws of net new money of the subgroup.

The Vanguard Group was the top attractor of municipal debt fund net inflows year-to-date, taking in $6.3 billion, followed by BlackRock (+$2.4 billion), Nuveen Fund Advisors (+$1.9 billion), and Goldman Sachs & Co/GSAM (+$1.7 billion).

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