Preliminary Findings Show Investors Injected A Net $454 Billion Into U.S. Mutual Funds, ETFs In Q1

A third round of stimulus payments, improving COVID-19 vaccine distributions, and talks of a $2.3 trillion infrastructure package pushed the broad-market indices to their fourth consecutive month of plus-side performance. The average equity fund (including ETFs) experienced a 6.31% return for Q1 2021 and a whopping one-year return of 61.39%.

Despite ongoing inflationary concerns, which drove the 10-year Treasury yield up 81 basis points during the first quarter to 1.74%—its highest closing value since January 23, 2020—and President Joe Biden’s plan to raise taxes on corporations and wealthy individuals, investors injected $454 billion into mutual funds and ETFs during Q1, using preliminary numbers.

Fearing an overheated market, a recent rise in coronavirus cases globally, and an increase in market volatility, money market funds (+$185.8 billion) were the main attractor of investors’ assets for the quarter. Nonetheless, investors continued to pad the coffers of long-term assets as well to the tune of $268.2 billion, with taxable bond funds (including ETFs) taking in $133.8 billion, followed by equity funds (+$107.7 billion) and municipal bond funds (+$26.8 billion).

With investors rotating out of the stay-at-home and growth-oriented stocks and into cyclical issues such as financials, energy, and other previously out-of-favor sectors, it wasn’t too surprising that small-cap funds rose to the top of the inflows charts for the quarter, attracting $28.5 billion. The average Lipper Small-Cap Value Fund (+22.12%) posted the second strongest return of all equity classifications for Q1 (outpaced only by Natural Resources Funds, +25.25%).

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Sector-financial/banking funds (including ETFs) took the runner-up position, taking in $16.1 billion during Q1, followed by the commodities laden sector-other funds macro-group (+$15.3 billion), sector-technology funds macro-group (+$14.4 billion), and sector-energy funds (+$14.2 billion).

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