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March 14, 2023

Fixed Income Funds & ETFs Attract Net New Money in February

by Tom Roseen.

Concerns about sticky inflation data, hawkish comments by Federal Reserve officials, another 25-basis-point (bp) rate hike at the beginning of February, and consumer spending rising to its highest level in almost two years weighed on investors’ psyche during the month. Even with the rise in uncertainty, investors were net purchasers of mutual fund assets for the second month in a row, injecting $40.5 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below). However, for the twenty-third consecutive month, stock & mixed-assets funds experienced net outflows (-$33.3 billion). Despite the 10-year Treasury yield rising 40 bps during the month, the fixed income funds macro-group—for the second month in a row—witnessed net inflows, taking in $24.4 billion. Money market funds (+$49.4 billion) attracted net new money for the fifth consecutive month.

For the tenth consecutive month, ETFs attracted net new money, however, they took in just $1.9 billion for February. Authorized participants (APs—those investors who create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the tenth month in a row—but they injected just $659 million into equity ETF coffers. For the thirteenth month running, they were net purchasers of bond ETFs—injecting $1.2 billion for the month. APs were net purchasers of three of the five equity-based ETF macro-classifications, padding the coffers of World Equity ETFs (+$9.3 billion), Alternatives ETFs (+$927 million), and Mixed-Assets ETFs (+$102 million) while being net sellers of Sector Equity ETFs (-$5.6 billion) and U.S. Diversified Equity ETFs (-$4.1 billion).

In this report, I highlight the February 2023 fund-flows results and trends for both ETFs and conventional mutual funds (including variable annuity underlying funds).

Highlights:

  • For the second month in a row, mutual fund investors were net purchasers of fund assets, injecting $40.5 billion into conventional funds for February.
  • Fixed income funds (+$24.4 billion for February) witnessed net inflows for the second consecutive month, while money market funds (+$49.4 billion) attracted net money for the fifth month in a row.
  • For the twenty-third straight month, investors were net sellers of stock & mixed-assets funds (-$33.3 billion).
  • APs were net purchasers of ETFs, but they injected just $1.9 billion for February.
  • And, for the thirteenth straight month, fixed income ETFs (+$1.2 billion for February) witnessed net inflows while investors were net purchasers of stock & mixed-assets ETFs (+$659 million).
  • World equity ETFs (+$9.3 billion) attracted the largest monthly net inflows of Lipper’s five equity-based ETF macro-groups.

Click here to download the February 2023 FundFlows Insight Report: Fixed Income Funds & ETFs Attract Net New Money in February.

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