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Fund Flows Turned Positive in April, but Investors Favored Safety

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Mutual fund and ETF flows turned positive in April, reversing a historic decline in March, which saw the biggest decline since at least 1993, according to Morningstar. Investors, however, remained skittish in April, favoring money market funds above all others, as they did in March, and withdrawing funds from stock funds. 

Net inflows into money market funds reached $388 billion, a little more than half the net inflows in March, trouncing inflows into any other fund category.

U.S. equity funds saw outflows of $18.1 billion compared with net inflows of $10.5 billion in March. About two-thirds of April outflows were from the Vanguard Total Stock Market Index (VTSAX).

Overall fund flows turned positive, with an estimated $17.5 billion flowing into all long-term funds, excluding money market funds, compared with the $326 billion outflows in March.

(Related: Fund Outflows in March Topped Outflows in October 2008)

In another reversal, taxable bond funds saw net inflows of $36.6 billion in April, versus outflows of $240.3 billion in March.

High-yield bond funds led the bond fund category for net inflows, collecting $10.7 billion, the most in more than 21 years of data, as “investors’ interest in risk-taking appeared to revive,” according to Morningstar. 

Large-cap blend funds, which combine growth and value stocks, and large-cap value funds led outflows among equity funds, as $3.3 billion left each category.

International equity funds, however, suffered the biggest withdrawals among all fund categories — $20 billion, close to 60% more than the previous month. 

Sector equity funds, in contrast, experienced near-record inflows of $16 billion, led by health care funds, which accounted for about half those inflows, followed by technology funds.

Even energy equity funds saw net inflows, of about $2 billion, led by $3 billion moving into the United States Oil Fund USO. Investors poured money into the ETF in March and April, betting that oil prices would rebound from recent lows, which pushed the ETF to the maximum allowed new share creation. That investment ultimately backfired when oil prices plummeted in late April, due in large part to negative prices in the futures contract that the ETF tracks.

(Related: U.S. Oil Prices Drop Below Zero, Spooking Stocks)

Commodity funds overall had the third biggest net inflows among fund categories in April, after taxable bond and sector equity funds, collecting a net $12.4 billion, about three times the size of inflows in March. One fund, SPDR Gold Shares ETF (GLD), accounted for over 40% of those flows.

Passive funds experienced larger flows than actively managed funds in almost all categories, whether more money was coming into those funds or leaving them. There were a few exceptions, however.

Actively managed municipal bond funds saw far bigger outflows than passive muni funds — $2.9 billion vs. $319 million — and passive alternative funds had net inflows of $6.8 billion, while their actively managed counterparts saw net outflows of $4.4 billion.

SPDR State Street Global Advisors was the big winner in April, collecting $16 billion in net inflows, followed by BlackRock’s iShares, with $8.5 billion, and J.P. Morgan, with $2.9 billion.

On the flip side, Dimensional Fund Advisors led on net outflows, losing $3.1 billion, followed by T. Rowe Price, with $2.4 billion exiting, then Invesco, $1.7 billion.

Vanguard gained just $347 million in net inflows, its smallest monthly inflows since July 2011.

— Check out Interactive Brokers Rolls Out ‘No Load’ Fund Shop on ThinkAdvisor.