January Fund Redemptions Coming Into Focus

The first month of 2016 was not an enjoyable time for investors—with net redemptions from long-term mutual funds and ETFs topping $8 billion.
Strategic Insight’s (SI) mutual fund flow data for January 2016 clearly shows that net redemptions from long-term mutual funds and ETFs dramatically picked up during the month.

SI finds redemptions across exchanged-traded funds (ETFs) and mutual funds totaled $8.2 billion in January. Passive funds continued to drive demand for stock and bond exposures, however, attracting $16 billion during the month.

Index equity mutual funds netted a respectable $20.6 billion in January, while monthly net redemptions from equity ETFs totaled $13.7 billion. “Among active funds, outflows from U.S. Equity totaled $23 billion during the month,” SI explains. “Active International Equity attracted $3.6 billion on continued demand for foreign large-cap exposure and managed futures strategies.”

Surely fresh in investors’ minds, SI observes the recent selloff in stock market values sparked by concerns in the global economic environment sent one-month average U.S. and international equity fund returns sharply lower, at -5.8% and -5.5%, respectively.

Amid the stock market turbulence, bond funds attracted net new investments of $4.3 billion in January on $12.1 billion of net inflows to index ETFs. Tax-free Bond funds netted $5.2 billion on the month (including $4.5 billion to active funds), SI says, while returning an average 1.0%. Government-oriented investment strategies led among taxable products, attracting a net $9.9 billion and returning an average 1.3% in January.