XLV - Conventional Fund Investors Sell In May And Go Away

2023-06-17 02:54:43 ET

Summary

• For the fourth month in five, mutual fund investors were net purchasers of fund assets, injecting $83.3 billion into conventional funds for May.
• Investors were net sellers of stock and mixed-assets funds (-$70.1 billion) for the twenty-sixth straight month, while fixed income funds (+$5.5 billion) witnessed net inflows for the first month in three.
• Money market funds (+$147.9 billion) witnessed their seventh monthly net inflows in eight.
• APs were net purchasers of ETFs, injecting $28.5 billion for May.
• Fixed income ETFs (+$14.4 billion for May) witnessed net inflows for the sixteenth straight month, while investors were net purchasers of stock and mixed-assets ETFs (+$14.1 billion).

Investors were net purchasers of mutual fund assets for the fourth month in five, injecting $83.3 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below). But the headline numbers are a bit misleading, with short-term assets drawing the lion’s share of investors’ purchases.

For the twenty-sixth consecutive month, stock & mixed-assets funds experienced net outflows (-$70.1 billion, their largest net outflows since December 31, 2022). However, with investors anticipating the Federal Reserve Board to skip an interest rate hike in June at its next FOMC meeting, the fixed income funds macro-group—for the first month in three—witnessed net inflows, taking in $5.5 billion. As a result of a flight to safety and investors’ attraction to rising yields, the money market funds (+$147.9 billion) macro-group witnessed its seventh monthly net inflow in eight.

For the thirteenth consecutive month, ETFs attracted net new money, taking in $28.5 billion for May. Authorized participants (APs—those investors who create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs—also for the thirteenth month in a row—injecting $14.1 billion into equity ETF coffers. For the sixteenth month running, they were net purchasers of bond ETFs—injecting $14.4 billion for the month. APs were net purchasers of three of the five equity-based ETF macro-classifications, padding the coffers of U.S. Diversified Equity ETFs (+$8.7 billion), World Equity ETFs (+$7.1 billion), and Alternatives ETFs (+$990 million) while being net sellers of Sector Equity ETFs (-$2.7 billion) and Mixed-Assets ETFs (-$63 million).

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

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