Investors Sour on Large-Cap Growth Funds and ETFs in January

Investors were net purchasers of mutual fund assets for the second month in a row, injecting $28.0 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for January. However, for the twenty-third month in 24, stock & mixed-assets funds suffered net redemptions (-$48.5 billion) for January. Despite a steepening Treasury yield curve, investors continued to pad the coffers of fixed income instruments, pushing the fixed income funds macro-group to its ninth consecutive month of net inflows, attracting $80.0 billion for December (their largest monthly net inflow on record). Money market funds (-$3.5 billion) witnessed net outflows for the eighth month running.

For the seventeenth month running, ETFs witnessed net inflows, taking in $62.4 billion for January. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs for the eighth consecutive month, injecting $42.7 billion into equity ETF coffers. And for the tenth month in a row, they were net purchasers of bond ETFs—injecting $19.7 billion for the month. APs were net purchasers of four of the five equity-based ETF macro-classifications, padding the coffers of Sector Equity ETFs (+$24.5 billion), World Equity ETFs (+$18.5 billion), Alternatives ETFs (+$1.4 billion), and Mixed-Assets ETFs (+$572 million), while being net redeemers of U.S. Diversified Equity ETFs (-$2.3 billion). Over the last three months, Stock & Mixed-Assets ETFs took in $159.5 billion and Bond ETFs attracted $50.8 billion of net new money.

In this report, I highlight the January 2021 fund-flows results and trends for both ETFs and conventional mutual funds.

Highlights:

• For the second consecutive month, mutual fund investors were net purchasers of fund assets, injecting $28.0 billion into the conventional funds business for January.
• Fixed income funds (+$80.0 billion for January, another monthly record) witnessed net inflows for the ninth month in a row, while money market funds (-$3.5 billion) suffered net outflows.
• For the twenty-third month in 24, investors were net redeemers of stock & mixed-assets funds (-$48.5 billion).
• APs were net purchasers of ETFs, injecting $62.4 billion for January, for the seventeenth month of consecutive inflows.
• And, for the tenth month running, fixed income ETFs attracted some $19.7 billion, while investors padded the coffers of stock & mixed-assets ETFs (+$42.7 billion), their eighth straight month of net inflows.
• For the first month in 18, small-cap ETFs (+$7.6 billion) experienced the largest net inflows of the four capitalization groups.