Despite rising concerns around future interest rate hikes, renewed global recessionary fears, and the possibility of new restrictions on technology sales to China by U.S. firms at the end of June, U.S. equity and taxable fixed income mutual funds (including ETFs) rose 4.74% and 0.26%, respectively, for the month-to-date (MTD) period, ended June 29, 2023.

On the equity side, Lipper’s U.S. Diversified Equity (USDE) Funds macro-classification led the way, posting a 6.22% return MTD, followed by domestic Sector Equity Funds (+4.81%) and World Equity Funds (+3.56%), while the Alternative Equity Funds (+0.53%) was the relative laggard of the equity macro-classifications.

Lipper’s Latin American Funds classification, posting an eye-popping 10.36% June MTD return, posted the strongest returns of the individual U.S. equity classifications, followed by Equity Leverage Funds (+10.13%), Industrial Funds (+9.20%), Small-Cap Value Funds (+9.05%), and Natural Resources Funds (+8.47%), while Dedicated Short Bias Funds (-7.92%) was the equity universe pariah, bettered by Precious Metals Equity Funds (-3.74%) and Commodities Precious Metals Funds (-2.06%).

While mega-cap tech issues had a great run early in the month, small-cap and core-oriented funds outpaced the other capitulation and style boxes for the MTD period, with Small-Cap Values Funds leading the way, followed by Small-Cap Core Funds (+8.04%).

World Taxable Fixed Income Mutual Funds Post Strong Returns

The World Taxable Fixed Income Funds (+1.15%) macro-classification posted the strongest returns for the June MTD period, followed by General Domestic Taxable FI Funds (+0.50%), Alternative Bond Funds (+0.48%), and Ultra-Short Obligation Funds (+0.40%), while the General U.S. Government & Treasury Funds (-0.74%) macro-classification and Short-/Intermediate-Term U.S. Government & Treasury Funds (-0.71%) were the outcastes in the taxable fixed income funds universe.

Turning our attention to MTD flows, investors were net purchasers of fund assets (including those of conventional funds and ETFs) injecting a net $10.4 billion through the LSEG Lipper fund-flows week ended Wednesday, June 28. Fund investors were net purchasers of taxable bond funds (+$10.7 billion), money market funds (+$8.7 billion), and tax-exempt fixed income funds (+$850 million) while being net redeemers of equity funds (-$9.9 billion).

That said, as has been the case, the dichotomy between conventional equity funds and equity ETFs continued in June, with conventional equity funds handing back some $21.2 billion MTD, while their ETF counterparts attracted $11.3 billion. None of the fund-flow macro-groups on the conventional equity fund side attracted net new money month to date. Large-cap funds (-$9.4 billion) witnessed the largest net redemptions so far this month, bettered by mid-cap funds (-$3.0 billion), equity income funds (-$2.7 billion), international equity funds (-$2.0 billion), and small-cap funds (-$1.0 billion).

On the equity ETF side, as a result of investors’ continued interest in artificial intelligence and the quasi-related rally by the Nasdaq Composite, ETF investors were net purchasers of large-cap ETFs (+$13.2 billion. Following large-cap ETFs at a distance, small-cap ETFs (+$3.0 billion) and sector-Financial/banking ETFs (+$1.9 billion) attracted the next largest draws in the equity ETF universe, while sector-energy ETFs (-$2.9 billion), the commodities heavy sector-other ETFs (-$2.7 billion), and international equity ETFs (-$1.6 billion) suffered the largest net redemptions of the group.

Corporate investment-grade debt funds (+$6.1 billion) attracted the largest draw of net new money on the conventional funds’ side MTD, followed by corporate high-yield funds (+$1.5 billion) and corporate high-quality funds (+$228 million). Meanwhile, flexible funds (-$2.4 billion) experienced the largest net redemptions, bettered by balanced funds (-$556 million) and international & global debt funds (-$371 million).

On the taxable fixed income ETF side, investors injected $1.6 billion into government-Treasury ETFs for the month-to-date period, followed by corporate investment-grade debt ETFs (+$1.5 billion), corporate high-yield ETFs (+$1.1 billion), and government-mortgage ETFs (+$1.1 billion) while being net redeemers of government-Treasury ETFs (-$105 million).

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Sources:

Data/Charts – “LSEG Lipper”

Commentary – “Tom Roseen, Head of Research Services, LSEG Lipper”

This article originally appeared on ValueWalk

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