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November 20, 2023

U.S. Fund Investors Sour on Money Market Funds and Turn to Domestic Equity ETFs in October

by Tom Roseen.

Investors were net redeemers of mutual fund assets for the second month in a row, withdrawing $134.2 billion from the conventional funds business (excluding ETFs, which are reviewed in the section below).

Stock & mixed-assets funds experienced net outflows (-$61.7 billion) for the thirty-first consecutive month. The fixed income funds macro-group—for the third month in a row—witnessed net outflows, handing back $36.0 billion (its largest since last December 2022). Investors gave the cold shoulder to the money market funds macro-group, redeeming $36.5 billion for October—its first monthly net redemption in six.

For the eighteenth consecutive month, ETFs attracted net new money, taking in $32.2 billion for October.

Authorized participants (APs—those investors who create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the eighteenth month in a row—injecting $14.8 billion into equity ETF coffers. For the twenty-first month running, they were net purchasers of bond ETFs—injecting $17.4 billion for the month (their largest monthly net inflows since March). APs were net purchasers of just one of the five equity-based ETF macro-classifications, padding the coffers of U.S. Diversified Equity ETFs (+$28.0 billion), while being net sellers of Sector Equity ETFs (-$7.6 billion), Alternatives ETFs (-$2.5 billion), World Equity ETFs (-$2.2 billion), and Mixed-Assets ETFs (-$892 million).

In this report, I highlight the October 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 redeemers of fund assets, withdrawing $134.2 billion from conventional funds for October.
  • Money market funds (-$36.5 billion) witnessed net outflows for the first month in six.
  • Fixed income funds (-$36.0 billion) suffered net redemptions for the third consecutive month while investors were net sellers of stock & mixed-assets funds (-$61.7 billion) for the thirty-first straight month.
  • APs were net purchasers of ETFs, injecting $32.2 billion for October.
  • Fixed income ETFs (+$17.4 billion) witnessed net inflows for the twenty-first straight month while investors were net purchasers of stock & mixed-assets ETFs (+$14.8 billion).
  • Year to date, equity ETFs attracted a net $203.8 billion while conventional equity funds handed back $498.2 billion.

Click here to download the October 2023 FundFlows Insight Report: U.S. Fund Investors Sour on Money Market Funds and Turn to Domestic Equity ETFs in October.

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