U.S. ESG And SRI Funds’ Assets Under Management Break The $1 Trillion Mark In Q1 2021

U.S. investors pushed equity funds to their fourth consecutive quarter of plus-side performance in Q1 2021. Investors embraced the $1.9 trillion stimulus package signed into law by President Joe Biden in late March, the Federal Reserve Board’s commitment to keeping interest rates low through at least 2023, and the rollout and improving distribution of COVID-19 vaccines.

All of these factors contributed to relatively strong returns for equity funds and ETFs during the quarter, with the average equity fund posting a 6.31% return, with Lipper’s Sector Equity Funds macro-classification (+8.94%) leading other macro-classifications.

However, fixed income investors evaluated what a third round of stimulus, a new infrastructure spending plan, and the continuation of loose monetary policy might have on the economy and inflation, leading to a steepening Treasury yield curve for the quarter—with the 10-year Treasury yield jumping 81 basis points to 1.74%, contributing to a slight market decline for the average taxable fixed income fund (-1.26%).

Mutual funds and ETFs attracted $522.9 billion in net new money during the quarter, with actively managed funds—excluding money market funds (+$163.6 billion)—taking in $156.5 billion, while their passively managed counterparts attracted $202.7 billion.

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Taking another slice of the data shown above and focusing on socially responsible investing (SRI) funds and the more recent focus on environmental, social, and governance (ESG) focused investment/screening practices, we saw similar passive versus active fund-flows trends for the quarter, while actively managed funds still slightly outdrew their passively managed cohorts for the one-period ended March 31, 2021.

Investors injected some $33.6 billion into SRI and ESG focused mutual funds and ETFs (collectively, responsible investing [RI] funds) during Q1 2021, bringing the one-year net inflows total to $121.7 billion. Assets under management for U.S. RI funds rose 7.05% from $940.5 billion on December 31, 2020, to $1.007 trillion on March 31, 2021.

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