Fund investors sold more mutual fund and ETF assets than they added last week as investors rotated out of U.S. equity funds and into bond and international equity funds.
Refinitiv Lipper reported $11.5 billion in investor withdrawals, the first outflow in six weeks, in their fund-flows report for the week ending Feb. 8. Money market fund withdrawals totaled $16.2 billion, the majority of the outflows. Investors bought $3.8 billion of taxable bond funds and $886 million of tax-exempt fixed income funds and international equity funds.
Investment Company Institute showed a similar trend for the week ending Feb. 1.
Total net fund flows tallied a positive $2.260 billion, with a $6.643 billion inflow to bond funds overcoming a $3.934 billion outflow in equity funds. Redemptions in domestic funds soared while world equity funds gained investors.
Many equity investors posted solid gains to start 2023, but last week was a bumpy ride. The Nasdaq composite posted its first weekly loss of the year, after rallying to levels not seen in five months.
ETF Investors Look To International Markets
According to Refinitiv, exchange traded fund investors redeployed $3.9 billion of capital to equity ETFs last week, generating net inflows for the third straight week. International equity ETFs were the funds of choice, taking in $2.2 billion, the seventh consecutive week of inflows. Domestic ETFs gained a lesser $1.7 billion.
Some international markets have outperformed U.S. markets in 2023.
Small-cap equity ETFs were second favorite among investors, injecting $2.1 billion into the group, followed by financial/banking ETFs, which added $1.3 billion.
Fund investors freed capital by selling $1.7 billion large-cap ETFs and $1.0 billion energy-sector ETFs.
Fixed Income ETFs Attract Strong Interest
Taxable fixed income ETFs posted positive net inflows for six out of the last seven weeks, as investors chased yield. They cashed out $1.9 billion of government treasury ETFs to buy a combination of flexible, corporate investment-grade debt and corporate high-yield ETFs.
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