Money Market Fund Reform Expectations Played Out in August Trading

Net new flows to long-term mutual funds and exchange-traded products (ETPs) totaled $28.2 billion in August, according to Strategic Insight, parent company of PLANADVISER.

Active and passive strategies experienced divergent trends in net investments. Passive funds led demand with $42.1 billion (including $27.5 billion to ETPs), while actively managed funds experienced aggregate net redemptions of $14 billion in August.

Taxable Bond funds saw the strongest demand among long-term funds, attracting $27.7 billion of net inflows. The space’s year-to-date flows of $146.3 billion represent a substantial increase over the $49.4 billion seen during the first eight months of 2015, Strategic Insight notes. Taxable Bond flows in August were fairly evenly split between active and passive strategies, as active funds experienced net investments of $14.7 billion and passive funds gathered net flows of $13 billion.

Active U.S. and International/Global Equity funds saw outflows of $35.6 billion in August, while index equity exposures attracted net inflows of $28.8 billion. Net outflows among active funds were driven by redemptions in large capitalization strategies. Non-Traditional strategies including Alternatives, Commodities, and Real Estate gathered positive net flows among active funds in August.

Net deposits into Money Market funds in August totaled $14.2 billion. The bifurcation in demand within this space continued, driven by the soon-to-be-enacted regulation. Taxable Money Market funds garnered $44.6 billion of net inflows, while Tax-Free Funds experienced $30.4 billion of net withdrawals. An even greater divergence continued to exist within the Taxable Money Market segment, as government money market funds saw net deposits of $150 billion in August while prime money market funds experienced net redemptions of $126 billion.

More about Strategic Insight is at www.strategic-i.com.