March 16, 2020

Fund and ETF Investors Turn Cautious in February

by Tom Roseen.

Investors were net purchasers of mutual fund assets for the ninth month in 10, injecting $35.2 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for February. However, the headline number is misleading.

The major benchmarks closed in correction territory during the month, declining at least 10% from recent market highs as stocks were crushed at month end on intensifying fears over the spread of COVID-19 and its possible impact on the global markets. For the thirteenth month in a row, stock & mixed-assets funds witnessed net outflows (-$13.8 billion) in February. Investors continued to look for yield and safe places to hide, pushing the fixed income funds macro-group to its fourteenth consecutive month of net inflows, injecting $17.9 billion for February. Money market funds (+$31.2 billion) witnessed net inflows for the ninth month in 10.

For the sixth month running, ETFs witnessed net inflows, taking in $12.5 billion for February. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net redeemers of stock & mixed-assets ETFs—for the first month in six—withdrawing $2.8 billion from equity ETF coffers. And for the sixteenth straight month, they were net purchasers of bond ETFs—injecting $15.3 billion for February. APs were net redeemers of four of the five equity-based ETF macro-classifications, withdrawing money from USDE ETFs (-$1.7 billion), World Equity ETFs (-$992 million), Sector Equity ETFs (-$198 million), and Alternatives ETFs (-$22 million), while injecting net new money into Mixed-Assets ETFs (+$115 million).

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

Highlights:

  • For the ninth month in 10, mutual fund investors were net purchasers of fund assets, injecting $35.2 billion into the conventional funds business for February.
  • For the fourteenth month in a row, fixed income funds (+$17.9 billion for February) witnessed net inflows, while money market funds (+$31.2 billion) witnessed net inflows for the ninth month in 10. For the thirteenth consecutive month, investors were net redeemers of stock & mixed-assets funds (-$13.8 billion).
  • For the sixth month in a row, authorized participants (APs) were net purchasers of ETFs, injecting $12.5 billion for February. However, APs were net redeemers of stock & mixed-assets ETFs (-$2.8 billion), while being net purchasers of fixed income ETFs (+$15.3 billion).
  • Year to date, APs injected only slightly more net new money into stock & mixed-assets ETFs (+$34.8 billion) than into fixed income ETFs (+$33.3 billion).

Click here to download the February 2020 FundFlows Insight Report: Fund and ETF Investors Turn Cautious in February.

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