February 8, 2013

Lipper Fund Flows: Another Week; Another Record for Stock Funds

by Tom Roseen

In spite of a brief selloff and some economic clouds on the horizon, investors continued to emphasize equity fund investments, with mutual funds and ETFs together reporting $6.1 billion of fresh inflows in the week ended February 6.

Investors pushed key stock market indices to new highs during the week ended February 6, a period that began with the Dow Jones Industrial Average rallying above 14,000 for the first time since October 2007. That helped equity funds post a return of 0.49% as a category, their fourth straight week of positive returns, and offered an inducement to investors to remain net purchaser of fund assets during the week.

According to data released late yesterday by Lipper, a division of Thomson Reuters, U.S. investors injected a total of about $3.6 billion into all categories of mutual funds and exchange-traded funds (ETFs) during the week ended February 6. Once again – for the seventh week in a row – equity funds and equity ETFs were big beneficiaries, as investors allocated a net $6.1 billion of new capital to these investment products in spite of the fact that Monday witnessed the single largest one-day decline in equity indices so far this year. After the big gains reported by both the Dow and the S&P 500 in January, with the latter posting its largest one-month advance since October 2011, investors clearly were apprehensive and bracing for some kind of correction. But M&A activity and better-than-expected earnings reports from consumer companies appeared to restore confidence in the outlook for stocks.

For the second consecutive week, equity ETFs experienced net inflows, taking in another $2.0 billion. But the SPDR S&P 500 ETF was toppled from its top position and indeed went from first to last position during the week, as net redemptions totaled $3 billion for the week. (The ETF has seen net sales in four of the last five weeks.) The SPDR S&P 500 was replaced at the head of the pack iShares Russell 2000 Index, which attracted $700 million of new assets, and iShares Dow Jones U.S. Real Estate ETF, which pulled in $600 million during the week. Meanwhile, conventional equity mutual funds continue to dominate the landscape, attracting an additional $4.1 billion in net inflows. That brings the five-week total to a remarkable $24.9 billion, the largest figure recorded for any five-week period since April 19, 2000. That also marks the first time in nearly a year that conventional equity funds have reported five straight weeks of positive flows.

Within the universe of stock mutual funds, domestic equity funds saw net inflows of $1.1 billion, with large-cap funds (last year’s pariah) remaining the biggest winner and attracting some $400 million during the week. But the big equity mutual fund winners were global and international stock funds, which attracted $3.1 billion of net new assets during the week. Lipper’s Emerging Markets Funds classification saw fund inflows of $1 billion or more for the fifth consecutive week, as investors allocated an impressive $1.8 billion to fund in this category during the period ended February 6.

While investors clearly continue to favor equity funds over their fixed income brethren, with taxable bond funds dominating the landscape with net inflows totaling $2.3 billion for the week. Of that, investors allocated $1.5 billion to corporate investment-grade debt funds (a group that marked its 34th straight week of net inflows) and $1.7 billion into flexible income funds. Loan participation funds remain popular with investors, reporting $1.2 billion of net sales, the highest level in any week since Lipper began tracking weekly flows in 1992. Interest in municipal debt funds remained intact for the sixth week in a row, although the net inflows of $100 million were muted in comparison with the level of investor interest in corporate debt funds.

In spite of some disappointing news on the economic front within the United States (where the unemployment rate edged higher in January, and factory orders disappointed) and from Europe, investors continued to display a preference for “risk on” assets and were once again net redeemers of money market fund assets to the tune of $4.9 billion in the just ended week.

For more information on this week’s fund flows data, please refer to Lipper’s database or this video.

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