October 15, 2020

Investors Continue to Shun Equity Funds in September While Embracing ETFs

by Tom Roseen.

Investors were net sellers of mutual fund assets for the fourth month in a row, withdrawing $150.9 billion from the conventional funds business (excluding ETFs, which are reviewed in the section below) for September.

After posting their strongest August returns in 34 years and hitting new record highs in the first two days of September, the U.S. markets witnessed some large declines. The Dow Jones Industrial Average experienced its largest one-day drop (808 points) since June as investors took some hard-won profits off the table after a spectacular run-up in tech and “stay-at-home” stocks. For the twentieth month in a row, stock & mixed-assets funds witnessed net outflows (-$69.4 billion) in September. However, investors continued to pad the coffers of fixed income instruments, pushing the fixed income funds macro-group to its fifth consecutive month of net inflows, injecting $37.4 billion for September. Money market funds (-$118.9 billion) witnessed net outflows for the fourth consecutive month.

For the thirteenth month running, ETFs witnessed net inflows, taking in $34.1 billion for September. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs for the fourth consecutive month, injecting $21.6 billion into equity ETF coffers. And for the sixth month in a row, they were net purchasers of bond ETFs—injecting $12.4 billion for September. APs were net purchasers of three of the five equity-based ETF macro-classifications, padding the coffers of U.S. Diversified Equity ETFs (+$16.6 billion), World Equity ETFs (+$5.5 billion), and Mixed-Assets ETFs (+$669 million), while being net redeemers of Sector Equity ETFs (-$730 billion) and Alternatives ETFs (-$472 million).

In this report, I highlight the September and year-to-date fund-flows results for both types of investment vehicles.

Highlights:

  • For the fourth month in a row, mutual fund investors were net sellers of fund assets, withdrawing $150.9 billion from the conventional funds business for September.
  • For the fifth month in a row, fixed income funds (+$37.4 billion for September) witnessed net inflows, while money market funds (-$118.9 billion) suffered net outflows. For the twentieth consecutive month, investors were net redeemers of stock & mixed-assets funds (-$69.4 billion).
  • For the thirteenth month in a row, authorized participants (APs) were net purchasers of ETFs, injecting $34.1 billion for September.
  • And, for the sixth month running, APs were net purchasers of fixed income ETFs (+$12.4 billion), while padding the coffers of stock & mixed-assets ETFs (+$21.6 billion) for the fourth consecutive month.

Click here to download the September 2020 FundFlows Insight Report: Investors Continue to Shun Equity Funds in September While Embracing ETFs.

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