That 2020’s second quarter was the best since the fourth quarter of 1999 is old news, but what is eye-opening is how equity funds performed over that quarter, which started only a week after the year’s low on March 23.

Lipper’s FundMarket Research Report for Q2 found equity funds were up just over 20% on average. In Q1, the average equity fund had a 22.3% decline.

However, volatility has remained: The VIX, at 28, is still double what it was in February but much lower than its March high of nearly 83.

Outperforming the other six broad-based equity groups was Lipper’s U.S. Diversity Equity Funds macros classification (USDE), up 23.5%, followed by Sector Equity Funds (+23.3%) and World Sector Equity Funds (+22.5%). The USDE and Sector quarterly performances had their best quarter since Q3 1979.

Other findings:

  • The Domestic Sector Equity Funds and Global Sector Equity Funds macro-classifications had six of the seven best performing classifications, according to Tom Roseen, head of research services for Refinitiv Lipper and author of the report.
  • The Precious Metals Equity Funds had the strongest return in the equity universe with an almost 58% return.
  • Among the USDE funds, the best returns were from Equity Leverage Funds (+43.3%) and Small-Cap Growth Funds (+32.5%).
  • U.S. Diversified Growth funds did the best in total return at 30.2%, beating out Core funds (+21%) and Value funds (+18%), small-cap with a 32.5% return. Small/Mid-cap growth funds did best for international diversified funds for the quarter at 22.4%.
  • Energy MLP funds performed the best of Domestic Sector Equity funds in Q2 with a 40% return followed by Consumer Services at 34%. Natural Resources and Science & Technology funds both came in around 33%.
  • For World Sector Equity funds, Precious Metals funds were followed by Global Science/Technology Funds at 36%.

Market Flows

Preliminary fund flows for the quarter showed mutual fund investors were net purchasers, injecting an roughly $254.6 billion into conventional funds (excluding ETFs). That said, despite returns, domestic equity funds were net sellers (-$95 billion).

Taxable bond funds had inflows of $76 billion, with munis bringing in a net $9.3 billion for the second quarter. Money market funds continued their growth for the eighth straight quarter with net inflows of $264 billion.

ETFs had net purchases of roughly $104 billion, of which $21 billion were equity ETFs, $80 billion went into taxable fixed income ETFs and $3.7 billion into municipal debt ETFs.

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