Fixed-income fund flows grew in 2018 according to a report by Cerulli Associates that highlighted exchange-traded fund (ETF) and mutual fund flows last year.
A flight to safety was apparent as the major U.S. indexes were all racked by volatile market swings and sell-offs towards the end of the year.
The Dow fell 5.6 percent, the S&P 500 was down 6.2 percent and the Nasdaq fell 4 percent. It was the worst year for stocks since 2008 and only the second year the Dow and S&P 500 fell in the past decade.
December was a particularly dreadful month: The S&P 500 was down 9 percent and the Dow was down 8.7 percent — the worst December since 1931. In one seven-day stretch, the Dow fell by 350 points or more six times.
Per ThinkAdvisor, “The report also noted the move to fixed income protection, especially due to demographics, shouldn’t be a surprise. As baby boomers age, protecting bull-market gains is “paramount,” especially as the time horizon to retirement gets shorter.”
Pockets of Opportunity
According to the report, there were five areas in particular that saw organic growth:
1) Large blend and foreign large blend funds: This category saw net inflows of $221.8 billion, including active ETFs that saw $542.2 billion in flows.
2) Ultrashort bond funds: This category saw inflows of $87.3 billion.
3) Muni national intermediate: This category saw a net inflow of $16.6 billion, which was mostly concentrated in actively-managed mutual funds.
4) Intermediate-term bonds: This category gained $20.3 billion in inflows–$7.8 billion of which went to ETFs.
5) Diverging emerging markets: This category saw a total net flow of $23.5 billion, which was mostly concentrated in indexed ETFs.
“Based on high-level flow figures, one could draw the conclusion that opportunity to gather net flows lay within index ETFs and mutual funds in 2018, but peeling back the onion reveals more significant pockets of organic growth opportunity, including within mutual funds,” the report stated.
For more market trends, visit ETF Trends.