Fund Investors Turn Risk Averse In May

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Includes: BND, EEM, HYG, IEFA, IVV, PSQ, SPY, SQQQ, XLE, XLK
by: Tom Roseen
Summary

For the first month in three, mutual fund investors were net purchasers of fund assets, injecting $82.6 billion into the conventional funds business for May.

For the fifth month in a row, fixed income funds (+$15.3 billion) witnessed net inflows, while money market funds (+$82.1 billion) experienced net inflows for the first month in three.

While for the fourth consecutive month, investors were net redeemers of stock and mixed-asset funds (-$14.7 billion).

For the first month in four, APs were net sellers of ETFs, withdrawing $10.4 billion for May.

APs were net sellers of stock and mixed-asset ETFs (-$16.7 billion), but net purchasers of fixed income ETFs (+$6.2 billion).

Photo Source: Reuters/Jose Luis Gonzalez. Trucks wait in a queue for border customs control to cross into the U.S. at the Zaragoza-Ysleta border crossing bridge in Ciudad Juarez, Mexico, June 1, 2019.

For the first month in three, investors were net purchasers of mutual fund assets, injecting $82.6 billion into the conventional funds business (excluding ETFs, which are reviewed in the section below) for May. However, the headline numbers are slightly misleading. Investors became very risk averse after learning about the deterioration of the U.S. and China trade talks and the late month news that President Donald Trump threatened tariffs on Mexico. For the fourth month in a row, stock and mixed-asset funds witnessed net outflows (-$14.7 billion) for May. With the Treasury yield curve shifting down for the month, the fixed income fund macro-group witnessed net inflows for the fifth month in a row, taking in $15.3 billion. And for the first month in three, money market funds (+$82.1 billion) witnessed net inflows.

For the first month in four, ETFs overall witnessed net outflows, handing back $10.4 billion for May. Authorized participants (APs - those investors who actually create and redeem ETF shares) were net redeemers of stock and mixed-asset ETFs for the first month in four, redeeming $16.7 billion from equity ETF coffers. But for the seventh straight month, they were net purchasers of bond ETFs - injecting $6.2 billion for May. APs were net sellers of three of the five equity-based ETF macro classifications - Sector Equity ETFs (-$6.8 billion), USDE ETFs (-$5.9 billion), and World Equity ETFs (-$4.0 billion) - while being net purchasers of Alternatives ETFs (+$22 million) and Mixed-Asset ETFs (+$2 million).

In this segment, I highlight the May fund-flows results for both types of investment vehicles.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.