January 20, 2022

Investors Bail on Conventional Funds in December While Turning to ETFs

by Tom Roseen.

Investors were net purchasers of mutual fund assets for the fifth month in a row, injecting $57.9 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for December. However, the headline numbers are quite misleading. For the ninth month running, stock & mixed-assets funds experienced net outflows (-$67.2 billion). And as a result of probable monetary tightening by the Federal Reserve Board in the near future, the fixed income funds macro-group—for the first month in 20—witnessed net outflows, handing back $7.3 billion for December. Money market funds (+$132.4 billion, their largest monthly net inflows since April 2020) attracted net new money for the fifth straight month. Over the last 12 months, conventional stock & mixed-assets funds handed back $355.2 billion, while bond and money market funds attracted $449.9 billion and $411.8 billion, respectively, of net new money.

For the twenty-eighth straight month, ETFs witnessed net inflows, taking in $101.2 billion for December. Authorized participants (APs—those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs for the nineteenth consecutive month, injecting $79.8 billion into equity ETF coffers. And for the twenty-first month in a row, they were net purchasers of bond ETFs—injecting $21.4 billion for the month. Once again, APs were net purchasers of all five equity-based ETF macro-classifications, padding the coffers of U.S. Diversified Equity ETFs (+$54.8 billion), World Equity ETFs (+$19.8 billion), Sector Equity ETFs (+$3.8 billion), Alternatives ETFs (+$721 million), and Mixed-Assets ETFs (+$617 million). Over the last 12 months, stock & mixed-assets ETFs took in $673.1 billion and bond ETFs attracted $211.6 billion of net new money.

In this report, I highlight the December 2021 fund-flows results and trends for both ETFs and conventional mutual funds (including variable annuity underlying funds).

Highlights:

  • For the fifth consecutive month, mutual fund investors were net purchasers of fund assets, injecting $57.9 billion into conventional funds for December.
  • Fixed income funds (+$7.3 billion for December) witnessed net outflows for the first month in 20, while money market funds (+$132.4 billion) experienced net inflows for the fifth consecutive month.
  • For the ninth straight month, investors were net sellers of stock & mixed-assets funds (-$67.2 billion).
  • APs were net purchasers of ETFs, injecting $101.2 billion for December, for their twenty-eighth month of consecutive inflows.
  • And, for the twenty-first month in a row, fixed income ETFs (+$21.4 billion for December) attracted net new money while investors padded the coffers of stock & mixed-assets ETFs (+$79.8 billion), their nineteenth straight month of net inflows.
  • For 2021, ETFs attracted a net $884.7 billion, while conventional funds took in some $506.5 billion.

Click here to download the December 2021 FundFlows Insight Report: Investors Bail on Conventional Funds in December While Turning to ETFs.

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