Fund Investors Sit on Their Hands While APs Remain Engaged in December

For the eighth month in a row, investors were net purchasers of mutual fund assets, injecting $42.6 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for December. However, the headline number was once again misleading.

During the month, investors cheered a better-than-expected nonfarm payrolls report and remained optimistic over trade negotiations between China and the U.S., pushing the average equity mutual fund’s one-year return to a whopping 24.05%, the strongest in a decade. Nevertheless, for the eleventh month in a row, stock & mixed-assets funds witnessed net outflows (-$60.4 billion) for December. Investors continued to look for yield and safe places to hide, pushing the fixed income funds macro-group to its twelfth consecutive month of net inflows, injecting $37.6 billion for December. Money market funds (+$65.4 billion) witnessed net inflows for the eighth month running.

For the fourth month running, ETFs witnessed net inflows, taking in $52.4 billion for December, bringing their one-year total to $318.8 billion. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the fourth month in a row—injecting $38.9 billion into equity ETF coffers. And for the fourteenth straight month, they were net purchasers of bond ETFs—injecting $13.6 billion for December. APs were net purchasers of four of the five equity-based ETF macro-classifications, injecting net new money into USDE ETFs (+$25.6 billion), World Equity ETFs (+$14.5 billion), Mixed-Assets ETFs (+$455 million), and Alternative ETFs (+$245 million), while being net redeemers of Sector Equity ETFs (-$1.9 billion).

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

Highlights

• For the eighth consecutive month, mutual fund investors were net purchasers of fund assets, injecting $42.6 billion into the conventional funds business for December.
• For the twelfth month in a row, fixed income funds (+$37.6 billion for December) witnessed net inflows, while money market funds (+$65.4 billion) witnessed net inflows for the eighth straight month.
• Despite strong returns, for the eleventh consecutive month, investors were net redeemers of stock & mixed-assets funds (-$60.4 billion).
• For the third month in a row, authorized participants (APs) were net purchasers of ETFs, injecting $52.4 billion for December. APs were net purchasers of stock & mixed-assets ETFs (+$38.9 billion), while also being net purchasers of fixed income ETFs (+$13.6 billion).
• For 2019, APs injected more net new money into stock & mixed-assets ETFs (+$167.2 billion) than into fixed income ETFs (+$151.6 billion).

Click here to download the December 2019 FundFlows Insight Report: Fund Investors Sit on Their Hands While APs Remain Engaged in December.