Market conditions deal a blow to active mutual fund flows

Investors spent $468.6 billion in passive ETFs in the first 11 months of 2022 and, according to the database of Morningstar, investors poured $24.8 billion into money market funds during the third quarter and another $69.9 billion in October and November.

Since October 2021, active mutual funds have had continuous monthly net withdrawals, according to statistics from Morningstar. In contrast, all but five of those months saw net inflows into passive mutual funds.

Jeff Tjornehoj, senior director of fund analytics at Broadridge, said that investors tend to become more conservative during economic downturns and shift their funds towards fixed income. However, he added, fixed-income strategies last year faced significant challenges because of inflation and rising interest rates.

“Investors [last] year were hit by a double whammy of declining equity markets and poor performance of fixed income, which led to massive outflows from bond funds,” Tjornehoj said.

The first 11 months of 2022 saw a net outflow of $483.3 billion from bond mutual funds. The highest net inflows of any category were received by alternative strategies, which brought in $16 billion throughout the period. At the end of November, the funds’ assets totalled $142.2 billion.