Asset Flows – How Money is Moving

Posted on May 9, 2020 by Gemmer Asset

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During periods of historic volatility, you often see significant changes in fund flows between asset classes. The past few months have been no different. Given this dynamic, we thought it would be interesting to take a quick look at what asset classes are taking in money and where that money is coming from.

 

March Saw Historic Outflows

 

 

During the initial phase of the downturn, investors fled nearly every asset class and went to cash. The above chart shows just how dramatic the flows were. While equity funds experienced big losses during march, taxable bond funds even more massive outflows.

 

That all changed in April. The market reversed course and the Fed announced their plans to ensure liquidity in many parts of the fixed income market. Here’s what happened with flows post-March…

 

US Equities

 

Over the past several months, money has been fleeing international stocks and US equities have been the main beneficiary.

 

 

The above chart shows US equity funds took in $18.8 billion in April while international funds lost -$10.5 billion. In fact, according to State Street, investors have fled non-US funds at the fastest rate ever over the past three months, making the “US stocks will outperform” trade very crowded.

 

Bonds

 

After the Fed announced they would expand their liquidity program to investment grade and high yield credit (stating that ETFs are an efficient way for them to buy bonds in bulk), bond funds took in a historic amount of assets.

 

 

Over the past 30 days, investment grade and high yield bond ETFs took in $18.5 billion – their second highest monthly total ever. Where’d it come from? Mainly cash, TIPS, mortgage backed securities and parts of the international equity market.

 

Sector Flows

 

What about sectors? What sectors have benefited (in terms of asset flows) from the shelter-in-place dynamic taking place across the country?

 

 

If you’re thinking vaccines, Zoom calls and toilet paper, you’re on the right track – Health Care, Technology and Consumer Staples focused ETFs took in a whopping $14.2 billion in net new assets over the past 30 days. For Healthcare and Technology, this is their highest monthly inflow ever. While dollar inflows aren’t as relevant historically as flows as a percentage of assets, it’s still worth analyzing the magnitude of some of these shifts.

 

Given the fact that this crisis is far from over and volatility is likely sticking around for a while, asset flows will most certainly continue to make significant shifts in the coming months. We’ll be monitoring the data and will revisit it in future posts.

 

 

 

 

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