March 18, 2019

APs Embrace Equity ETFs in February, While Fund Investors Turn Risk-Averse

by Tom Roseen.

Photo Source: REUTERS/Leah Millis

For the second month in a row, investors were net purchasers of mutual fund assets, injecting $64.4 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for February. However, the headline number is slightly misleading. While investors continued to embrace news that trade talks between the U.S. and China were advancing and cheered a softer, gentler Federal Reserve Board—pushing the Dow Jones Industrial Average to its ninth consecutive week of plus-side returns—they turned a cold shoulder to equity funds. For the ninth month in ten, stock & mixed-asset funds witnessed net outflows (-$10.3 billion) for February. With investors’ renewed search for yield, the fixed income funds macro-group witnessed net inflows for the second month in a row, taking in $36.3 billion—their largest haul since February 2018. And for the fifth month running, money market funds (+$38.5 billion) witnessed net inflows, taking in the largest amount of net money of the three broad-based macro-groups in the conventional funds universe.

For the seventh month in eight, ETFs overall witnessed net inflows, taking in $21.5 billion for February. Authorized participants (APs, those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-asset ETFs, adding $12.4 billion to equity ETF coffers. And for the fourth consecutive month, they were net purchasers of bond ETFs—injecting $9.0 billion for February. APs were net sellers of one of the five equity-based ETF macro-classifications—Mixed-Asset ETFs (-$61 million)—while being net purchasers of U.S. Diversified Equity ETFs (+$6.9 billion), Sector Equity ETFs (+$4.3 billion), World Equity ETFs (+$895 million), and Alternatives ETFs (+$339 million). In this segment, I highlight the February fund-flows results for both types of investment vehicles.

Highlights

  • For the second month running, mutual fund investors were net purchasers of fund assets, injecting $64.4 billion into the conventional funds business for February.
  • For the second month in a row, fixed income funds (+$36.3 billion for February) witnessed net inflows, while for the ninth month in ten, investors were net redeemers of stock & mixed-asset funds (-$10.3 billion). Money market funds (+$38.5 billion) witnessed the largest net inflows for the month.
  • Authorized participants (APs) were net purchasers of ETFs for the seventh month in eight, injecting $21.5 billion for February. APs injected net new money into stock & mixed-asset ETFs (+$12.4 billion) and fixed income ETFs (+$9.0 billion) during the month.
  • For the tenth month in 11, APs were net purchasers of U.S. Diversified Equity ETFs (+$6.9 billion for February).

Click here to download the February 2019 FundFlows Insight Report: APs Embrace Equity ETFs in February, While Fund Investors Turn Risk-Averse.

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