A Tale Of Two Investment Vehicles: Estimated Net Flows For Conventional Funds Versus ETFs

Year-to-date estimated net flows into conventional mutual funds and exchange-traded funds continue to tell a mixed story. Through the Lipper fund-flows week ended Wednesday, May 13, 2020, investors continued to inject net new money into the business, bringing the year-to-date total to $871.6 billion. Flow trends, however, are quite different for conventional mutual funds and ETFs.

While conventional mutual funds have attracted some $798.8 billion year to date, the short-term asset class—money market funds—was the only recipient of net new money. These funds took in a record-setting $1.1 trillion—beating any full-year estimated net flows in history. The only years that come even close were 2007 (+$720.4 billion) and 2008 (+$687.9 billion).

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Interestingly, the flows above indicate that investors truly are still in a savings mindset but appear to be waiting for better days to put their money to work in other asset classes. So far this year, conventional equity mutual funds have handed back $115.6 billion, with large-cap funds accounting for $82.3 billion of those net outflows. Meanwhile, international equity funds (+$6.8 billion) and sector-technology funds (+$689 million) took in the largest net flows of conventional equity mutual funds.

Over the last 10-plus years, mutual fund investors were enamored of fixed-income funds, redeeming money only in 2015 (-$51.6 billion) and 2018 (-$10.3 billion). However, so far this year, they have become net redeemers of the asset class, removing a net $139.0 billion through May 13 as investors ducked for cover given the economic fallout from COVID-19 on corporations globally and concerns of credit quality and viability going forward. Municipal bond funds (-$24.9 billion year to date) have suffered a comparable fate as well for similar reasons.

In contrast, exchange-traded funds have been attractors of investors’ money, taking in a net $84.8 billion year to date. All three asset classes in the ETF universe are in positive territory for estimated net flows so far this year, with equity ETFs attracting a net $39.8 billion, taxable bond ETFs taking in $44.4 billion, and municipal bond ETFs witnessing net inflows of $624 million.

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