In the seven months since the massive Christmas market sell-off, exchange-traded and mutual funds still haven’t recovered all the money flows they lost. And the money that has come back in to funds is being allocated very differently, suggesting investors are a bit more risk-averse – and yield-hungry.
Those observations come from DataTrek Research, which tallies up information from the Investment Company Institute, for mutual funds, and www.xtf.com, for ETFs. DataTrek co-founder Nicholas Colas notes that $134 billion rushed out of U.S. listed funds and ETFs in December 2018, and as of about mid-July, only $130 billion has flowed back in.
The money that’s returned to funds has gone to very different asset classes. So far this year, bond funds have attracted $241 billion, while stock funds have lost $89 billion.
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“The shadow of December’s volatility continues to weigh on investor’s minds,” Colas said. “Fixed income is the only place fund investors want to be.”
One caveat: investor sentiment may have turned in July. Over $31 billion has flowed into ETFs through July 30th, which Colas says is more than the one-year monthly average of $25.3 billion, and of that, $18.1 billion went into stocks, also higher than its 12-month average, of $14.4 billion.
Investors are hunting for yield, not an easy task in a world awash in negative-yielding debt. High-yield – that is, riskier – corporate bond funds attracted $2.7 billion in July, compared to just $628 million for sovereign debt funds.
In a sign investors may be expecting choppy markets ahead, $790 million flowed into products that hedge the VIX VIX, -0.50% , the so-called volatility index.