Investors Turn a Cold Shoulder to Fixed Income Funds and ETFs in January

Investors were net redeemers of mutual fund assets for the first month in six, redeeming $176.3 billion from the conventional funds business (excluding ETFs, which are reviewed in the section below) for January. For the tenth month running, stock & mixed-assets funds experienced net outflows (-$25.4 billion). And as a result of the Federal Reserve Board telegraphing rate hikes as early as March, the fixed income funds macro-group—for the second consecutive month—witnessed net outflows, handing back $12.0 billion for January—its largest since March 2020. Money market funds (-$138.9 billion, their largest monthly net outflows since March 2010) handed back money for the first month in six.

For the twenty-ninth straight month, ETFs witnessed net inflows, taking in $33.4 billion for January. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs for the twentieth consecutive month, injecting $40.5 billion into equity ETF coffers. However, for the first month in 22, they were net redeemers of bond ETFs—redeeming $7.2 billion for the month. APs were net purchasers of four of the five equity-based ETF macro-classifications, padding the coffers of World Equity ETFs (+$22.8 billion), Sector Equity ETFs (+$13.3 billion), U.S. Diversified Equity ETFs (+$3.2 billion), and Alternatives ETFs (+$1.7 billion), while being net redeemers of Mixed-Assets ETFs (-$459 million).

In this report, I highlight the January 2022 fund-flows results and trends for both ETFs and conventional mutual funds (including variable annuity underlying funds).

Highlights:

• For the first month in six, mutual fund investors were net redeemers of fund assets, withdrawing $176.3 billion from conventional funds for January.
• Fixed income funds (-$12.0 billion for January) witnessed net outflows for the second month in a row, while money market funds (-$138.9 billion) experienced their largest net outflows since March 2010.
• For the tenth straight month, investors were net sellers of stock & mixed-assets funds (-$25.4 billion).
• APs were net purchasers of ETFs, injecting $33.4 billion for January, for their twenty-ninth month of consecutive inflows.
• And, for the first month in 22, fixed income ETFs (-$7.2 billion for January) suffered net redemptions while investors padded the coffers of stock & mixed-assets ETFs (+$40.5 billion), their twentieth straight month of net inflows.
• APs were net purchasers of World Equity ETFs, injecting $22.8 billion for January (their strongest monthly net inflows since April 2015).