Q1 Fund Flows - The Only Place Money is Moving is to the Sidelines
Fund flow information for Q1 2023 was very interesting. After a very positive January, we saw significant declines in February and March. As we have seen for some time now, a significant amount of money is waiting on the sidelines in money market funds:
In March alone, money market funds took in $363B, their third-largest increase since 1993 (source Morningstar):
There were positive flows into taxable-bond funds as March saw $11B in inflows and $71B for the quarter; most of that into passive funds. Government bond funds collected over half the money that flowed into taxable-bonds for the quarter with long government leading the way.
On the other hand, short-term bond funds saw $9B in outflows for March and $12B for the quarter - the fifth consecutive quarter of outflows:
On the equity side, equity funds saw outflows of over $16B in March and have had negative outflows in five consecutive months. Only large-blend funds saw inflows for March amongst the 9 categories included in the group.
Rounding out the view, commodity funds have now seen negative monthly flows since May 2022 whereas municipal-bond funds had an increase in $6B for the quarter:
Looking categorically at March inflows and outflows:
Overall, money on the sidelines is an opportunity - but with inflation creeping up, it might not be "safe".