September 11, 2020

Despite Market Meltdown, Flows into Long-Term Funds and ETFs Remain Positive

by Tom Roseen.

The high-flying tech and stay-at-home stocks took a beating during the Refintiv Lipper fund-flows week ended September 9, 2020. While the NASDAQ Composite did enter correction territory, declining 10.03% from its most recent market closing high on September 2, investors buying the dip helped the index recover some of those three-day losses in the last day of trading. For the fund-flows week, the index was down 7.59%. In contrast, the average equity fund (including ETFs) was down just 2.22% for the week, but Lipper’s Natural Resources Funds (-6.72%), Commodity Energy Funds (-6.60%), and Equity Leverage Funds (-5.33%) classifications experienced the largest declines in the equity funds universe.

However, the rapid declines in the market did not equate to massive outflows from long-term mutual fund and ETF assets during the week. For the week, equity funds (including ETFs) witnessed net outflows of just $1.9 billion, while taxable bond funds (+$6.5 billion) and tax-exempt bond funds (+$1.0 billion) attracted net new money.

As has been the case over the last several months, conventional equity mutual funds (ex-ETFs) did experience net redemptions for the week, handing back $7.8 billion, suffering net redemptions for the twentieth consecutive week. However, equity ETFs attracted a net $6.0 billion for the week, with SPDR S&P 500 ETF (SPY) attracting $7.4 billion and ProShares UltraPro QQQ ETF (TQQQ) taking in some $1.1 billion.

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Large-Cap Growth Funds (-$2.4 billion, including ETFs) handed back the largest net redemptions for the week of all the classifications housed in Lipper’s U.S. diversified equity funds macro-group, bettered slightly by Large-Cap Core Funds (-$1.4 billion). In the sector equity funds and ETFs space, Science & Technology Funds (-$855 million), Consumer Services Funds (-$751 million), and Health/Biotechnology Funds (-$695 million) experienced the largest net outflows of the macro-group. While in the world equity funds group, International Multi-Cap Growth Funds (-$705 million) and Global Equity Income Funds (-$434 million) handed back the largest net redemptions for the fund-flows week.

As might be expected given the slight flight away from risk-on plays, High Yield Funds (-$566 million) and Loan Participation Funds (-$260 million) suffered the second and third largest net redemptions for the week and bettered the net redemptions of General U.S. Treasury Funds, which handed back some $683 million for the week in the taxable bond fund universe. Nonetheless, the darlings in the taxable fixed income space of late—Core Bond Funds (+$2.2 billion, including ETFs), Core Plus Bond Funds (+$1.4 billion), and Short Investment-Grade Debt Funds (+$1.0 billion)—continued to attract net new money.

As mentioned earlier, municipal bond funds attracted just slightly more than $1.0 billion for the week, bring their net inflows streak to 18 consecutive weeks. General & Insured Municipal Debt Funds (+$354 million) and Short Municipal Debt Funds (+$311 million) were the primary attractors of investors’ money, while, in the same vein as their taxable counterparts, High Yield Municipal Debt Funds (-$88 million, including ETFs) witnessed the only major redemption for the fund-flows week, their third week of net outflows after a 14-week inflows run.


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