by Tom Roseen.
Fund flows into taxable bond funds and ETFs continue to swamp those into equity funds and ETFs. Year to date, taxable bond funds (including ETFs) have attracted some $262.1 billion, while equity funds have handed back $150.3 billion during the same period. It appears that many investors are heeding the warnings by some pundits that a recession is nearing.
Fund investors have been in a risk-off mode for most of 2019 despite stellar stock market returns, injecting $430.8 billion into money market funds year to date. However, for the Lipper fund-flows week ended November 20, 2019, investors were net redeemers of money market funds—withdrawing $25.3 billion (their largest weekly net outflows since April 17, 2019).
The conservative nature of mutual fund investors continued. For the fortieth consecutive week, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $3.7 billion during the most recent fund-flows week. In contrast, ETF investors continued to be a little more aggressive, injecting net new money for the sixth consecutive week into equity ETFs (+$898 million this past fund-flows week). Combined with the $898 million inflow for equity ETFs, this left investors as net redeemers of equity funds (-$2.8 billion).
Year to date, the difference between conventional equity fund investors and equity ETF investors is quite striking, with the former withdrawing a net $210.9 billion, while the latter injected a net $60.6 billion. That said, both investor types have gravitated towards fixed income, with conventional fund investors and ETF investors injecting $157.2 billion and $104.9 billion, respectively, year to date. For the most recent fund-flows week, fund investors (including ETFs) were net purchasers of taxable fixed income funds (+$12.4 billion, their largest weekly net inflows since February 4, 2015) and municipal bond funds (+$2.0 billion).
With the Federal Reserve cutting its key lending rate for the third time this year in October, investors continued their search for yield and appeared to be willing to put a little more risk on. Core Bond Funds (+$92.4 billion, including ETFs) have attracted the lion’s share of net new money year to date, followed by Core Plus Bond Funds (+$26.9 billion), Multi-Sector Income Funds (+$26.0 billion), and Corporate Debt BBB-Rated Funds (+$21.5 billion).
Investors looking for bond funds that have a liberal investment mandate with a go-anywhere feel to them have been looking at flexible income and flexible portfolio funds, which have taken in a net $21.9 billion combined. For the most recent fund-flows week, flexible funds attracted the largest draw of net new money of any taxable fixed income macro-groups, attracting $5.7 billion (its largest weekly draw since Lipper began providing weekly flows back in 1992).