Analysis reveals double-digit declines for asset managers, historic hit to mutual funds
As Canadian mutual funds experienced historic losses in March, their counterparts in the U.S. suffered similar outflows and declines amid coronavirus-ravaged markets.
Citing the April Cerulli Edge U.S. monthly product trends report, ThinkAdvisor reported that U.S. mutual funds and ETFs saw asset declines in the double-digits, with mutual funds dropping 13.6% and ETFs shedding 12.4%.
Mutual funds suffered a historic US$335.2 billion in investor withdrawals, equal to 2.2% of their February month-end assets. That dragged flows over the January-to-March period deep into negative territory with $291.7 billion in outflows.
The overall decline in ETF assets was offset by steady net investor inflows, resulting in $9.3 billion being added to the vehicles in March.
Passive equity strategies attracted US$35.8 billion in flows by way of US$20.7 billion plowed into mutual funds and US$15.1 billion into ETFs. Most of that went into U.S. equity strategies, which Cerulli said likely came as investors were enticed as prices of high-quality, low-cost equity index-tracking products became more attractive.
Fixed-income ETFs endured US$20.7 billion in net negative flows, while alternative ETFs attracted substantial year-to-date flows relative to its modest size of US$46bn.
Cerulli said that the performance of certain major liquid alternatives categories in the first quarter, coupled with their long-term performance versus traditional stock and bond funds, make them tough for advisors and clients to consider for their portfolios.
However, some liquid-alt categories proved robust as markets declined. Notably, managed-futures funds exhibited the lowest five-year correlation to equity markets, ending the first quarter flat after a long stretch of poor returns.
Money market fund assets rose by 19% to US$4.3tn as investors injected US$684.7bn into the products. But an analysis of the three broad Morningstar categories for such funds — taxable, tax-free, and prime funds — revealed different outcomes.
Taxable money market funds took in US$824 billion, whereas tax-free and prime products shed US$3bn and US$136 bn, respectively. The divergent flows spoke to investors’ preference for safer government-backed securities, according to Cerulli.
