Exchange traded funds snapped a streak of 23 straight months of positive flows dating back to January 2014, and bled $1.8 billion in January, according to Boston-based research and consulting firm Cerulli Associates.
However, the firm notes that while the outflows, combined with poor January market returns, led to a 4.7 percent drop in assets, ETFs still maintain more than $2 trillion in total assets.
After amassing flows of more than $100 billion during 2015, international equity ETFs slumped in January, purging $3.1 billion. Outflows were driven by diversified emerging market funds (-$2.3 billion), which endured outflows of $3.6 billion over the past 12 months.
Lest one thinks mutual funds are reaping the benefits of an ETF decline, Cerulli also finds that mutual fund assets sank for the third straight month, slipping 4.7 percent to $11.3 trillion in January. Flows were net negative ($12 billion) for the month as investors pulled out $32 billion from active mutual funds, and invested only $20 billion in their passive counterparts.
Active funds kicked off 2016 with outflows of nearly $31 billion in January, marking the ninth consecutive month of redemptions, the firm notes. Passive flows, on the other hand, remained positive at $17 billion. However, it was not enough to prop up total passive assets, which fell 4.1% after a drop in equity market values.
So what is doing well? Muni bonds, apparently. Cerulli says Muni bond funds continue their roll in 2016, gathering flow of $4.5 billion in January, as investors sought out tax-exempt income and less volatility. Nuveen accounted for $937.7 million of the month’s flows, with the manager’s intermediate duration Fund ($489 million) being its most popular.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
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