June 19, 2019

Fund Investors Turn Risk Averse In May

by Tom Roseen.

For the first month in three, investors were net purchasers of mutual fund assets, injecting $82.6 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for May. However, the headline numbers are slightly misleading. Investors became very risk averse after learning about the deterioration of the U.S. and China trade talks and late month news that President Donald Trump threatened tariffs on Mexico. For the fourth month in a row, stock & mixed-asset funds witnessed net outflows (-$14.7 billion) for May. With the Treasury yield curve shifting down for the month, the fixed income funds macro-group witnessed net inflows for the fifth month in a row, taking in $15.3 billion. And for the first month in three, money market funds (+$82.1 billion) witnessed net inflows.

For the first month in four, ETFs overall witnessed net outflows, handing back $10.4 billion for May. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net redeemers of stock & mixed-asset ETFs for the first month in four, redeeming $16.7 billion from equity ETF coffers. But for the seventh straight month, they were net purchasers of bond ETFs—injecting $6.2 billion for May. APs were net sellers of three of the five equity-based ETF macro-classifications—Sector Equity ETFs (-$6.8 billion), USDE ETFs (-$5.9 billion), and World Equity ETFs (-$4.0 billion)—while being net purchasers of Alternatives ETFs (+$22 million) and Mixed-Asset ETFs (+$2 million).

In this segment, I highlight the May fund-flows results for both types of investment vehicles.

Highlights

  • For the first month in three, mutual fund investors were net purchasers of fund assets, injecting $82.6 billion into the conventional funds business for May.
  • For the fifth month in a row, fixed income funds (+$15.3 billion for May) witnessed net inflows, while for the fourth consecutive month, investors were net redeemers of stock & mixed-asset funds (-$14.7 billion). Money market funds (+$82.1 billion) witnessed net inflows for the first month in three.
  • For the first month in four, authorized participants (APs) were net sellers of ETFs, withdrawing $10.4 billion for May. APs were net sellers of stock & mixed-asset ETFs (-$16.7 billion), but net purchasers of fixed income ETFs (+$6.2 billion).
  • Year to date, APs injected more net new money into bond ETFs (+$48.6 billion) than into stock & mixed-asset ETFs (+$18.5 billion).

Click here to download the May 2019 FundFlows Insight Report: Fund Investors Turn Risk Averse In May.

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