Fund and ETF Investors were Net Purchasers of Fixed Income Funds in May

Investors were net purchasers of mutual fund assets for the fourth month in a row, injecting $33.0 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for May.

During the month, the major benchmarks continued to win back losses witnessed in March as investors cheered the easing of lockdowns established to contain the coronavirus and the economic relief measures taken by the Federal Reserve and Congress. Nonetheless, for the sixteenth month in a row, stock & mixed-assets funds witnessed net outflows (-$46.3 billion) in May. However, investors cheered the Federal Reserve’s resolve to provide liquidity to fixed income instruments, pushing the fixed income funds macro-group to its first month of net inflows in three, injecting $47.5 billion for May. Money market funds (+$31.8 billion) witnessed net inflows for the fourth consecutive month.

For the ninth month running, ETFs witnessed net inflows, taking in $25.9 billion for May. However, 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 three, withdrawing $3.0 billion from equity ETF coffers. But for the second month in a row, they were net purchasers of bond ETFs—injecting $28.9 billion for May—their largest monthly net inflows on record. APs were net purchasers of three of the five equity-based ETF macro-classifications, padding the coffers of Sector Equity ETFs (+$12.0 billion), Alternatives ETFs (+$1.6 billion), and Mixed-Assets ETFs (+$240 million), while being net redeemers of World Equity ETFs (-$11.9 billion) and U.S. Diversified Equity ETFs (-$5.0 billion).

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

Highlights:

• For the fourth consecutive month, mutual fund investors were net purchasers of fund assets, injecting $33.0 billion into the conventional funds business for May.
• For the first month in three, fixed income funds (+$47.5. billion for May) witnessed net inflows, while inflows into money market funds (+$31.8 billion) cooled somewhat. For the sixteenth consecutive month, investors were net redeemers of stock & mixed-assets funds (-$46.3 billion).
• For the ninth month in a row, authorized participants (APs) were net purchasers of ETFs, injecting $25.9 billion for May.
• And, for the second month in a row, APs were net purchasers of fixed income ETFs (+$28.9 billion, their largest on record), while being net redeemers of stock & mixed-assets ETFs (-$3.0 billion).