Strong November Flows Don’t Change the Larger Trends for 2023

U.S. mutual funds and exchange-traded funds collected $33 billion in November 2023, just their fifth month of inflows in 2023. The vast majority of inflows accrued to just two category groups: U.S. equity and taxable bond. Five of the 10 groups suffered outflows in November.

Monthly Long-Term U.S. Fund Flows

Status Quo Largely Persists for U.S. Equity Funds

Nearly $22 billion entered U.S. equity funds in November, their largest inflow since they gathered $35 billion in May 2022. As usual, passive large-blend funds did the heavy lifting. They took in about $29 billion in November and have collected a whopping $140 billion for the year to date. Large-growth funds collected $1.6 billion in November, their first monthly inflow since June 2022.

U.S. Equity Category Flows

High-Yield and Corporate-Bond Funds Turn a Corner

The taxable-bond cohort collected $21 billion in November behind breakout flows into some of its riskier pockets. High-yield bond funds absorbed nearly $13 billion in their best month since May 2020, and corporate-bond funds reeled in nearly $5 billion. After favoring safer bond funds for most of 2023, investors in November pivoted into categories that court more credit risk.

Taxable-Bond Flows

Short-Term Woes Weigh on Municipal-Bond Funds

The exodus from short-term bonds has hurt the municipal-bond group more than the taxable one. Short-term municipal- and taxable-bond funds have endured comparable 2023 outflows, but the municipal-bond cohort was hit harder because short-term funds represented more of its total asset base entering the year (20% vs. 11%), and it didn’t have long-term government bonds to lean on.

Fixed-Income Organic Growth Rates

A Covered Call’s Last Call?

Flows into the long-irrepressible JPMorgan Equity Premium Income JEPI strategy are slowing. The $42 million it collected in November was its smallest since December 2020. But J.P. Morgan has another covered-call trick up its sleeve: JPMorgan Nasdaq Equity Premium Income ETF JEPQ raised its haul in each of the past four months and crossed the $1 billion monthly threshold for the first time in November.

Covered-Call ETF Flows

This article is adapted from the Morningstar Direct U.S. Asset Flows Commentary for November 2023. Download the full report here.