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Market Extra: Safe haven plays still popular amid rotation into cyclical stocks, March fund flows show

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Investors are not abandoning safe haven plays that have worked in the stock market during the coronavirus pandemic, even as they make a long-awaited rotation into assets most likely to benefit from the economic recovery, according to a report on March fund flows.

The report, prepared by data provider Refinitiv Lipper for MarketWatch, shows that the category of multi-cap value funds picked up the most money in March, followed by emerging markets funds. Also among the categories with the biggest inflows: large-cap value funds and financial-services funds.

Still, S&P 500 Index funds were third on the list, and general U.S. Treasury funds 11th, just missing a spot in the top ten. “I think people are still concerned,” said Tom Roseen, head of research services for Refinitiv Lipper. “They’re looking at Treasurys for safety.”

ETF CLASSIFICATION INFLOWS
Multi-Cap Value Funds $9.1 billion
Emerging Markets Funds $8.5 billion
S&P 500 Index Funds $6.5 billion
Multi-Cap Core Funds $5.2 billion
Equity Income Funds $5.2 billion
Large-Cap Value Funds $4.9 billion
Financial Services Funds $4.4 billion
Natural Resources Funds $4.1 billion
Small-Cap Core Funds $3.7 billion
Industrials Funds $3.5 billion
Source: Refinitiv Lipper

Utility funds had the best return, likely on the back of the massive power outages across much of the southern United States, followed by energy MLP funds and a swathe of value funds: small-cap, multi-cap and mid-cap.

But when the data is sorted by returns for individual funds, not just categories, an intriguing picture emerges. The best performers are funds involved with construction, manufacturing, or production – or the raw materials that go into those processes, as noted in the table below.

ETF One-month return
Breakwave Dry Bulk Shipping ETF
BDRY,
-2.59%
30.9%
VanEck Vectors Steel ETF
SLX,
-0.11%
14.9%
Invesco S&P SmallCap Value with Momentum ETF
XSVM,
-0.14%
13.9%
SPDR S&P Homebuilders ETF
XHB,
+0.06%
13.5%
Pacer US Cash Cows 100 ETF
COWZ,
-0.01%
13.2%
iShares US Home Construction ETF
ITB,
-0.34%
12.9%
SPDR S&P Retail ETF
XRT,
+0.81%
12.5%
Invesco S&P SmallCap 600 Revenue ETF
RWJ,
+0.44%
12%
First Trust Utilities AlphaDEX Fund
FXU,
-0.27%
11.8%
Invesco S&P 500 Equal Weight Utilities ETF
RYU,
-0.14%
11.6%
Source: Refinitiv Lipper

Also returning double digit percentage gains: the SPDR S&P Metals & Mining ETF XME, the Aberdeen Standard Physical Palladium Shares ETF PALL, and more.

That’s a classic early-cycle phenomenon, Roseen said in an interview. “I’m surprised it didn’t take off earlier,” he said.

Roseen noted another takeaway about investor behavior in the data. “People aren’t chasing returns — they’re being forward-looking.” One example is the emerging-markets category, which picked up $8.5 billion, but saw flat returns.

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