by Tom Roseen.
Conventional mutual fund investors and, at various times ETF investors, have been reluctant to embrace equity securities. This comes as not much of a surprise given the uncertainty surrounding the coronavirus and countries reopening their economies, increasing trade tensions, and concerns encompassing a narrow rally in technology stocks that has been driving markets higher. For the Lipper fund-flows week ended June 24, 2020, equity funds (including ETFs) witnessed net redemptions to the tune of $5.0 billion. Year to date, the group has handed back $119.7 billion, with the average equity fund witnessing a 7.96% market loss for the same period.
For the quarter-to-date (QTD) period, however, the average equity fund returned a handsome 18.43%. Nonetheless, fund investors remain net redeemers of equity funds, redeeming a net $72.3 billion. In particular, conventional equity funds have suffered net redemptions QTD so far of $87.5 billion, while equity ETFs have attracted some $15.2 billion.
On the ETF side of this equation, sector-other ETFs (+$27.0 billion), sector-technology ETFs (+$10.0 billion), and sector-healthcare/biotechnology ETFs (+$6.1 billion) were the three-top macro-groups attracting investors’ money, with Lipper’s Commodities Precious Metals ETFs (CMP) classification (+$17.9 billion, a component of sector-other ETFs) drawing in the largest amount of net new money. Surprisingly, though, that classification only returned 13.53% for the same period, contrasted by the top performing classification QTD—Precious Metal Equity ETFs (AU), returning a whopping 49.9%. The explanation probably points toward the safe-haven play for the physical (CMP) versus the equity ownership of mining stocks and the like (AU).
On the conventional equity fund side, investors were net purchasers of sector-technology funds (+$3.4 billion), sector-health/biotechnology funds (+$2.4 billion), and mid-cap funds (+$764 million) as fund investors embraced the narrow market leadership caused by the recent tech-related rally.
In contrast, nondomestic equity funds and ETFs have suffered net redemptions, with international equity and global equity funds and ETFs suffering net redemptions of $51.2 billion and $6.5 billion QTD, respectively. Here authorized participants (APs) and conventional fund investors appear to be of a common mindset, with international and global equity mutual funds witnessing net redemptions of $28.7 billion and $5.9 billion, while APs withdrew a net $22.5 billion and $587 million from international and global equity ETFs, respectively.
On the international equity side of the ledger, emerging markets funds and ETFs suffered the largest net redemptions in the macro-group, handing back a net $16.8 billion QTD. Conventional fund investors withdrew a net $5.3 billion, while APs redeemed a net $11.5 billion for the period. While not a top performer QTD, the Emerging Markets Funds (including ETFs) classification returned an attractive 21.81%. Investors appear to be keeping a concerned eye on shifts in supply chains, trade disputes, liquidity, profitability, and demand when evaluating riskier assets.