Money Market Funds Attract Largest Net Inflows Since April 2020 for March

Shrugging off the early March turmoil in the banking sector and another 25-basis point (bps) interest rate hike on March 22—investors cheered dovish comments from the Federal Reserve after its most recent Federal Open Market Committee meeting and signs of moderating inflation, with the average equity fund rising 0.89% for the month. However, the rise in uncertainty was a catalyst for the large net inflows seen in March.

Investors were net purchasers of mutual fund assets for the third month in a row, injecting $286.4 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below). Nevertheless, for the twenty-fourth consecutive month, stock & mixed-assets funds experienced net outflows (-$41.0 billion). And because of ongoing inflation concerns and growing probabilities of an additional interest rate hike by the Federal Reserve Board during the month, the fixed income funds macro-group—for the first month in three—witnessed net outflows, handing back $23.3 billion. However, money market funds (+$350.8 billion) attracted net new money for the sixth consecutive month—their largest monthly net inflows since April 2020 as investors looked for safe-haven investments.

For the eleventh consecutive month, ETFs attracted net new money, taking in $32.4 billion for March. Authorized participants (APs—those investors who create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the eleventh month in a row—injecting $3.2 billion into equity ETF coffers. For the fourteenth month running, they were net purchasers of bond ETFs—injecting $29.2 billion for the month. APs were net purchasers of just two of the five equity-based ETF macro-classifications, padding the coffers of U.S. Diversified Equity ETFs (+$8.3 billion) and World Equity ETFs (+$230 million) while being net sellers of Sector Equity ETFs (-$4.0 billion), Mixed-Assets ETFs (-$1.4 billion), and Alternatives ETFs (-$15 million).

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

Highlights:

• For the third month in a row, mutual fund investors were net purchasers of fund assets, injecting $286.4 billion into conventional funds for March.
• Fixed income funds (-$23.3 billion) witnessed net outflows for the first month in three, while money market funds (+$350.8 billion) attracted net money for the sixth month in a row.
• For the twenty-fourth straight month, investors were net sellers of stock & mixed-assets funds (-$41.0 billion).
• APs were net purchasers of ETFs, injecting $32.4 billion for March.
• For the fourteenth straight month, fixed income ETFs (+$32.4 billion for March) witnessed net inflows, while investors were net purchasers of stock & mixed-assets ETFs (+$3.2 billion).
• S. Diversified Equity ETFs (+$8.3 billion) attracted the largest monthly net inflows of Lipper’s five equity-based ETF macro-groups.