Conventional Equity Funds Witness Outflows in July, While Equity ETFs Attract Net New Money

For the third month in a row, investors were net purchasers of mutual fund assets, injecting $90.4 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for July. However, the headline number is misleading. Fund investors remained risk averse even though the broad-based U.S. stock indices posted plus-side returns for the month. For the sixth month in a row, stock & mixed-assets funds witnessed net outflows (-$25.4 billion) for July. However, Treasuries rallied for the month on increasing uncertainty despite a 25 basis-point cut in the Federal funds rate at month end, propelling the fixed income funds macro-group to its seventh consecutive month of net inflows, taking in $41.7 billion for July. Money market funds (+$74.0 billion) witnessed net inflows for the third month running.

For the second consecutive month, ETFs witnessed net inflows, taking in $21.9 billion for July. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the second month in a row—injecting $12.1 billion into equity ETF coffers. And for the ninth straight month, they were net purchasers of bond ETFs—injecting $9.8 billion for July. APs were net purchasers of all five equity-based ETF macro-classifications—USDE ETFs (+$6.9 billion), Sector Equity ETFs (+$3.7 billion), Alternatives ETFs (+$716 million), World Equity ETFs (+$715 million), and Mixed-Assets ETFs (+$122 million).

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

Highlights:

• For the third consecutive month, mutual fund investors were net purchasers of fund assets, injecting $90.4 billion into the conventional funds business for July.
• For the seventh month in a row, fixed income funds (+$41.7 billion for July) witnessed net inflows, while for the sixth consecutive month, investors were net redeemers of stock & mixed-assets funds (-$25.4 billion). Money market funds (+$74.0 billion) witnessed net inflows for the third straight month.
• For the second straight month, authorized participants (APs) were net purchasers of ETFs, injecting $21.9 billion for July. APs were net purchasers of stock & mixed-assets ETFs (+$12.1 billion) and fixed income ETFs (+$9.8 billion).
• Year to date, APs injected more net new money into bond ETFs (+$85.3 billion) than into stock & mixed-assets ETFs (+$64.9 billion).