Money Market Reform Impacts Mutual Fund Flows

Forthcoming regulatory reform continued to significantly impact money market allocations during July, according to Strategic Insight.

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.

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.

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