This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes product trends as of March 2023, including mutual funds, exchange-traded funds (ETFs), and money market funds.

Highlights from this research:

• Mutual funds closed 1Q 2023 with $17.0 trillion in assets, having grown 4.4% over the period—thanks to rebounding equity and fixed-income markets. This growth comes despite continued outflows, which summed to more than $60 billion during the quarter. Through 1Q 2023, mutual fund outflows continue to be driven by the U.S. equity (-$40.8 billion) asset class.

• ETFs continue to be a destination for investors, who collectively poured $77.8 billion in net flows into the vehicle during 1Q 2023 YTD. Net flows, coupled with positive returns across equities and fixed income, has led to 5.7% asset growth over the first quarter of the year. Total assets now reside at just less than $6.9 trillion.

• The COVID-19 pandemic, the run up in interest rates, and the regional banking crisis have given money market funds significant tailwinds—helping propel assets from $3.6 trillion at year-end 2019 to more than $5.2 trillion as of 1Q 2023. The beneficiaries of the climb in U.S. money market fund assets and net flows are a select group of firms, as the top-10 managers collectively account for more than 81% of assets. Cerulli expects money market funds to continue to be an attractive option for short-term cash management and income generation, assuming the Federal Reserve does not significantly reverse its position on fighting inflation and begin cutting interest rates. However, pending regulatory changes and potential market structure issues could present issues for money market managers.