Fund Flows in March Drive a Positive Quarter

Strategic Insight data shows net deposits to long-term mutual funds and ETFs totaled $46.7 billion in March. 

Monthly mutual fund flow data published by Strategic Insight (SI), an Asset International company, shows inflows of $46.7 billion to long-term mutual funds during March lifted “quarterly long-term non-VA ’40 Act fund flows” to $54.3 billion for the first quarter of 2016.

Passive funds continued to drive even stronger inflows, SI finds, attracting $47.4 billion during the month and totaling $83.4 billion on the quarter.

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U.S. equity funds netted $7.4 billion during March, ending the month in positive net flow territory for the second time in the trailing 12 months. Outflows from active U.S. equity persisted, SI finds, totaling $13.6 billion in March. International equity funds netted $2.6 billion on demand for index exchange-traded funds (ETFs) and mutual funds, while passive emerging market stock funds attracted $5.8 billion during the month.

The SI data shows that among broad asset classes, taxable bond funds led monthly net inflows, collecting $31.1 billion on strong demand for both active and passive corporate bond exposure. Municipal bond funds continued to see steady positive net investment, attracting $5.6 billion during the month and lifting quarterly net inflows to $16 billion. As of March, net new investment to bond funds year-to-date totals $55.7 billion.

Monthly net redemptions from money-market funds totaled $13.4 billion.

More information on obtaining Strategic Insight research is at www.sionline.com

IRS Withdraws Proposed Nondiscrimination Rules

Proposed rules providing nondiscrimination testing relief for certain DB plans is not affected.

The Internal Revenue Service (IRS) has announced it will withdraw certain provisions of proposed regulations published on January 29, 2016.  

The provisions of the proposed regulations that will be withdrawn are the provisions that would modify Internal Revenue Code (IRC) Sections 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c). These provisions were intended to address certain qualified retirement plan designs that take advantage of flexibility in the existing nondiscrimination rules to provide a special benefit formula for selected employees without extending that formula to a classification of employees that is reasonable and established under objective business criteria.

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Cross-tested plans, as well as qualified supplemental executive retirement plans (QSERPs) use these designs.

In Announcement 2016-16, the IRS says it and the Treasury have given additional consideration to the potential effects of those provisions on the adoption and continued maintenance of qualified retirement plans with a variety of designs and have concluded that further consideration will be needed with respect to issues relating to those provisions.  Accordingly, the Treasury Department and the IRS will withdraw the provisions.

The provisions relating to defined benefit (DB) nondiscrimination testing relief are not affected.

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