October Rally: ETFs Attract Their Largest Net Inflows Since March

Investors were net redeemers of mutual fund assets for the tenth month in a row, redeeming $109.7 billion from the conventional funds business (excluding ETFs, which are reviewed in the section below) for October. For the nineteenth month running, stock & mixed-assets funds experienced net outflows (-$72.7 billion—their largest monthly outflows since October 2020). As a result of the 10-year Treasury yield rising 27 basis points (bps) during the month, ahead of another Fed interest rate hike, the fixed income funds macro-group—for the second month in a row—witnessed net outflows, handing back $65 billion (their largest since May 2022). Money market funds (+$28.0 billion) witnessed net inflows for the first month in three.

For the sixth consecutive month, ETFs attracted net new money, taking in $92.9 billion for October (their strongest monthly net inflows since March 2022). Authorized participants (APs—those investors who create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the sixth month in a row—injecting $61.2 billion into equity ETF coffers. For the ninth month running, they were net purchasers of bond ETFs—injecting $31.7 billion for the month. APs were net purchasers of four of the five equity-based ETF macro-classifications, padding the coffers of U.S. Diversified Equity ETFs (+$49.3 billion), World Equity ETFs (+$9.5 billion), Sector Equity ETFs (+$2.6 billion), and Mixed-Assets ETFs (+$109 million), while being net sellers of Alternatives ETFs (-$333 million).

In this report, I highlight the October 2022 fund-flows results and trends for both ETFs and conventional mutual funds (including variable annuity underlying funds).

Highlights:

• For the tenth straight month, mutual fund investors were net redeemers of fund assets, withdrawing $109.7 billion from conventional funds for October.
• Fixed income funds (-$65.0 billion) witnessed net outflows for the second consecutive month, while money market funds (+$28.0 million) attracted net money for the first month in three.
• For the nineteenth straight month, investors were net sellers of stock & mixed-assets funds (-$72.7 billion).
• APs were net purchasers of ETFs, injecting $92.9 billion for October.
• And, for the ninth straight month, fixed income ETFs (+$31.7 billion) witnessed net inflows while investors were net purchasers of stock & mixed-assets ETFs (+$61.2 billion).
• S&P 500 Index ETFs (+$23.7 billion) witnessed their strongest monthly net inflows since December 31, 2021.