SQQQ - Conventional Funds (Including VAs) Hit By $1.2 Trillion In Redemptions While ETFs Attract $597.5 Billion For 2022

Summary

• For the twelfth straight month, mutual fund investors were net redeemers of fund assets, withdrawing $94.1 billion from conventional funds for December.
• Fixed-income funds (-$53.0 billion) witnessed net outflows for the fourth consecutive month, while money market funds (+$86.9 billion) attracted net money for the third month in a row.
• For the twenty-first straight month, investors were net sellers of stock & mixed-assets funds (-$128.0 billion).
• APs were net purchasers of ETFs, injecting $39.0 billion for December.
• And for the eleventh straight month, fixed-income ETFs (+$12.8 billion for December) witnessed net inflows, while investors were net purchasers of stock & mixed-assets ETFs (+$26.1 billion).

As a result of both equity and fixed-income funds suffering downside performance in December, ongoing inflation fears, and Federal Reserve officials doubling down on their commitment to fight inflation, investors were net redeemers of mutual fund assets for the twelfth month in a row, redeeming $94.1 billion from the conventional funds business (excluding ETFs, which are reviewed in the section below). For the twenty-first month running, stock & mixed-assets funds experienced net outflows (-$128.0 billion - their largest monthly outflows since March 2020). With the Treasury yield curve rising at all maturities (excluding the one-year, which declined one basis point [bp] during the month), the fixed-income funds macro group - for the fourth month in a row - witnessed net outflows, handing back $53.0 billion. Money market funds (+$86.9 billion) attracted net new money for the third consecutive month. For 2022, conventional funds (including variable annuity underlying funds) witnessed $1.224 trillion in net redemptions.

For the eighth consecutive month, ETFs attracted net new money, taking in $39.0 billion for December. Authorized participants (APs - those investors who create and redeem ETF shares) were net purchasers of stock & mixed-assets ETFs - also for the eighth month in a row - injecting $26.1 billion into equity ETF coffers. For the eleventh month running, they were net purchasers of bond ETFs - injecting $12.8 billion for the month. APs were net purchasers of four of the five equity-based ETF macro classifications, padding the coffers of U.S. Diversified Equity ETFs (+$19.6 billion), World Equity ETFs (+$10.8 billion), Mixed-Assets ETFs (+$1.1 billion), and Alternatives ETFs (+$361 million), while being net sellers of Sector Equity ETFs (-$5.7 billion).

In this report, I highlight the December 2022 fund flows results and trends for both ETFs and conventional mutual funds (including variable annuity underlying funds).

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