The Markets August 17, 2016

Money Market Reform Impacts Mutual Fund Flows

Forthcoming regulatory reform continued to significantly impact money market allocations during July, according to Strategic Insight.
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Net flows to long-term mutual funds and exchange-traded products (ETPs) totaled $36 billion in July, according to Strategic Insight, an Asset International company.

Beyond these aggregate totals, however, the divergence in demand between active and passive strategies remained significant. Passive funds led demand with $61 billion of net commitments (including $43 billion to ETPs), while actively managed mutual funds experienced $25 billion of net redemptions in total during July.

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Demand for taxable bond funds surged in July, with mutual funds and ETPs attracting $33 billion of net inflows during the month. This total represented the largest monthly intake for taxable bond strategies since January 2013. Taxable bond flows during July were split fairly evenly between active and passive strategies, with $15.5 billion going to active funds and $17.7 billion to passive exposures.

Emerging market bond strategies experienced an increase in demand, as the search for yield intensifies around the world. Actively managed emerging market bond funds attracted $3 billion of net inflows during July, reversing the trend of $4.4 billion in net redemptions during the first half of 2016, while emerging market bond ETPs garnered $1.8 billion during the month.

Money market funds garnered $15.6 billion of net inflows in aggregate during July. Within this total, the forthcoming regulatory reform continued to significantly impact money market allocations. Government funds attracted roughly $75 billion of net inflows during July, while prime funds saw $50 billion of net redemptions.

More information about Strategic Insight is at www.sionline.com.

Data & Research August 17, 2016

One-Third of Millennials Don’t Expect Social Security to Be There for Them

And only 21% are working with a financial adviser
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While 80% of Millennials are confident that they will achieve their financial goals, 34% of them do not think the Social Security safety net will still be in existence by the time they retire, according to the 2016 Northwestern Mutual Planning & Progress Study.

Only 21% of Millennials have a financial adviser, yet 72% of those who do not are interested in receiving professional guidance, compared to just 57% of the general population.

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Among the different age groups, Millennials (ages 18 to 34) are least likely to anticipate more financial crises in the future (66% versus 76% for Gen X, those ages 35 to 49, and 80% of those 50 and older).

Additionally, 40% of Millennials think the economy will improve this year, compared to 33% of the general population and 25% of those 50 and older.

Fifty-eight percent of Millennials consider themselves highly disciplined or disciplined when it comes to planning out their financial futures. They are also more likely to recognize that the lack of planning can impede one’s retirement than other age groups (40% versus 28% of both Gen X and those 50 and older).

While they are optimistic about the long-term, they are worried about the present; one in 20 Millennials worry about money on an hourly basis. Their top-cited sources of anxiety include day-to-day expenses (50%), unexpected expenses (45%) and student loan debt (34%).

Sixty percent of Millennials who are suffering from financial anxiety say it is negatively impacting their careers, compared to 41% of the general population. Asked how financial security could change their lives, 39% of Millennials said it would permit them to pursue their dreams or their passions, compared to 29% of the general population.

Among those Millennials experiencing financial anxiety, 80% said that eliminating financial stress would enable them to improve their careers, compared to 66% of the general population.

“It is encouraging to see that Millennials are striking a balance between being realistic about the implications of extended longevity and remaining positive about building a solid financial future,” says Rebekah Barsch, vice president of planning for Northwestern Mutual.

Northwestern Mutual’s full study can be downloaded here.

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